By Leith van Onselen Following on from this morning’s post on the 5-city home values results for March, please find below RP Data’s official March Media Release, which also includes results for the other capital cities (i.e. Hobart, Darwin. and Canberra) and ‘rest-of-state’, as well as a breakdown of results for both houses and units.
Australian property is one the widest and deepest asset bubbles in the history of capitalism. Any objective assessment of this “market” can lead to no other conclusion.
With a long history of commitment to home ownership, Australians have always been prepared to structure their finances around property. This showed up in a total dwelling stock to GDP ratio that persisted around a very high 150% from 1960 to 1990. In the late 1990s that shot up to 200% and then embarked on near ceaseless climb to 360% today.
There are many other guides to the extreme overvaluation of Australian property. The ratio of household debt (overwhelmingly mortgages) to disposable income is the highest in the world at 186%. Median price to income multiples are anything from 12x in Sydney, to 10x in Melbourne, down to still immensely unaffordable 6x in smaller capitals, up from 3-4x times in all over the long run for all. The extent of overvaluation is plain.
What makes the Australian property bubble unique is the degree to which it has warped the nation’s political economy. Once a diverse and vibrant resources and manufacturing economy, over the twenty years that the Australian housing bubble grew that shape changed completely. An huge proportion of the debt underpinning Australian property is borrowed from offshore, almost $1 trillion, mostly by its big four major banks. This perpetually inflated the local currency, as well as input costs like land prices, which dramatically diminished Australian competitiveness and drove tradable sectors like manufacturing offshore. From 14% of output in the 1970s, manufacturing hit 5% of output in 2016, the lowest in the OECD.
Moreover, the centrality of Australia property to the wealth of the national polity increasingly distorted policy and even elections. In the 2008 global financial crisis, the then Labor government bailed out the the big four banks with guarantees to their offshore loans, rewriting the entire rule book for Australia’s financial architecture in one panicked afternoon. Public subsidies poured into demand-side stimulus, as well as RMBS markets. Any notion that Australian property was a “market” evaporated. Australian property was, and remains, a kind of asset quango, a public/private partnership in support of the retirement plans of its pre-dominant Baby Boomer generation.
MacroBusiness cover all elements of Australian property daily.
These guarantees exist to this day and reached their peak distortion to the political economy in 2016 when the ruling Liberal/National Party Coalition government fought and won an election in the singular defense of “negative gearing”, the principal tax policy most responsible for investor’s favouring property over other asset classes.
Contemporary Australia does not just have a property bubble, it has morphed into Propertocracy in which the primacy of house prices determines who leads the country, what policies are chosen and which generations prosper.
By Leith van Onselen In the month of March 2013, the RP Data-Rismark 5-city daily dwelling values index, which covers the five major capital city markets, recorded a 1.30% increase, with all major capitals except Adelaide recording rises in values (see next chart). It was the third consecutive monthly rise in values and follows increases
By Leith van Onselen Finally, a politician has the balls to speak-out about what is required to achieve affordable housing in Australia’s mining towns: freeing-up land supply. From the Sunshine Coast Daily: UNDER a radical new scheme, Federal Member for Kennedy, Bob Katter, claims he can reduce the cost of house blocks in mining towns to
By Leith van Onselen In the week ended 28 March 2013, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, recorded a 0.31% increase, which followed last week’s 0.04% increase. It was the seventh straight weekly rise (see next chart). Value gains were broad-based, with all major capitals
By Leith van Onselen RP Data has today released data on vendor discounting across Australia’s property markets, which continues to improve. According to the Media Release: …the average discount on a typical home was -7.5 per cent from its initial list price; across the combined capital cities the figure was lower at -6.4 per cent.
By Leith van Onselen The Reserve Bank of Australia (RBA) Financial Stability Review (FSR), released earlier today, contains the below gem on the Melbourne housing market, which aligns with my overall view: Although housing loan arrears rates are currently low across most parts of Victoria, the outlook for the Melbourne property market appears to be
Regular readers will know that I view foreign investment in residential property and more generally as a positive. However, that does not mean that promised screens and protections of said property purchases should not be thorough and effective. Instead, according to reader Gunnamatta, they are neither. Indeed Gunnamatta has, in the past few days, tested
By Leith van Onselen Please find below Residex’s latest housing market update, which includes house and unit price results as at end-February 2013, whereby house prices rose at the national level (+0.96%) and unit prices fell (-0.15%). In this month’s report, Residex’s founder, John Edwards, sees continued improvement in the housing market. There is one
While Australian regulators are busy patting themselves on the back for a job well done in the rear vision mirror, the Reserve Bank of New Zealand has at least one eye to the future today as it moves another step towards new macroprudential tools. From Interest.co.nz: The Reserve Bank says it wants to increase the
By Leith van Onselen Please find below RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 24 March 2013. This week’s report includes: Latest weekly dwelling value results; Latest median house & unit prices; Average time on market & vendor discounts; Auction results & clearance rates;
By Leith van Onselen The Queensland Department of Environment and Resource Management (DERM) has released data on housing transfers and mortgage lodgements for the month of February. According to DERM, the number of housing transfers and mortgage lodgements fell by -10.1% and -3.7% respectively in February 2013. However, on a year-on-year basis, housing transfers rose
By Leith van Onselen Following on from last week’s post on the huge surge in Melbourne CBD apartment approvals, the Age over the weekend published a great article on the large lift in apartment approvals across Melbourne’s CBD and inner suburbs, which is depressing apartment rents across the city: The number of apartments built in
By Leith van Onselen The Housing Industry Association (HIA) has today released a Research Note entitled “Perspectives on Australian House Prices”, which attempts to review the state of the housing market with a view to establishing the likely future direction of prices. The HIA first plots house prices and the number of house transactions
By Leith van Onselen The weekend just gone was dubbed “Super Saturday” for the 2,415 auctions scheduled across Australia’s capital cities, which was the highest number of auctions since late-2010: Based on the available data, the auction market performed solidly, with preliminary clearance rates in the mid-to-high 60% range recorded in the two major auction
By Leith van Onselen In the comments threads of my recent articles there has been some discussion on the extent of foreign property purchases of Australian real estate, as well as claims and counter-claims about what foreigners are allowed and not allowed to do when it comes to buying Australian housing. I thought it was
By Leith van Onselen Earlier in the week, Houses and Holes reported how Victoria’s planning minister, Matthew Guy, had approved the monumental Australia 108 development, which would become the tallest tower in the Southern Hemisphere, and that Mr Guy had approved more than 17,000 apartments in 30 projects within the City of Melbourne since taking office
By Leith van Onselen In the week ended 21 March 2013, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, recorded a 0.04% increase, which followed last week’s big 0.47% increase. It was also the sixth straight weekly rise (see next chart). Value gains were driven by Perth,
By Leith van Onselen The Housing Industry Association (HIA) today released its quarterly housing affordability index for the December quarter of 2012, which registered another solid improvement. From the Media Release: Housing affordability surged again in the December 2012 quarter, driven by earnings growth, interest rate cuts and weak price developments, said the Housing Industry
By Leith van Onselen From RP Data comes the below graphic showing that 2,415 auctions are scheduled this weekend across Australia’s capital cities, which would be the highest number of auctions since late-2010: Melbourne alone is expected to host around 1,200 auctions, according to the REIV. I’m tipping an auction clearance rate in the mid-to-high
By Leith van Onselen Following on from yesterday’s post on the New South Wales Government’s plan to significantly boost Sydney’s housing supply, the AFR has today provided more information on the initiative, as well as some of the potential road blocks surrounding it. First, the AFR has included the below map showing where the Government
By Leith van Onselen A raft of data has been released recently illustrating the sharp drop-off in housing transactions since mid-2010. First, the total number of home sales across Australia in 2012 was the lowest since 1996, according to RP Data (see next chart). Second, the average holding period for Australian houses has risen substantially
By Leith van Onselen For decades, housing affordability in Sydney has been stretched, with homes typically costing far more than the other capitals when measured against incomes (see next chart). Underpinning the higher home prices are Sydney’s land values which were, for a long time, out of kilter with Australia’s other capitals (see next table).
By Leith van Onselen Please find below RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 17 March 2013. This week’s report includes: Latest weekly dwelling value results; Latest median house & unit prices; Average time on market & vendor discounts; Auction results & clearance rates;
By Leith van Onselen SQM Research has just released rental vacancy data for the month of February, which revealed no change in the rental vacancy rate over the month, but a slight fall in the overall number of rental vacancies. Over the year, however, the rental vacancy rate rose slightly to 1.9% nationally from 1.7%
By Leith van Onselen From Property Observer today comes research from ANZ Bank showing that the current housing construction upswing in at least 25 years: The current modest recovery follows an expected 225 basis points being cut from the cash rate since November 2011. This reflects ANZ’s forecast of a further 50 basis points cut
By Leith van Onselen The Real Estate Institute of Victoria (REIV) yesterday released its preliminary auction results for the weekend just gone, which registered a solid increase after last week’s tepid results on the back of low volumes due to the Labour Day long weekend. The REIV reported a preliminary clearance rate of 69% on
By Leith van Onselen In the week ended 14 March 2013, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, recorded a big 0.47% increase, which followed last week’s huge 0.67% increase. It was also the fifth weekly rise in a row (see next chart). Value gains were
By Leith van Onselen The Reserve Bank of Australia (RBA) last night released a speech (below) Christopher Kent, Assistant Governor (Economic), entitled Recent Developments in the Australian Housing Market. The speech contains some useful data and analysis of current trends affecting the housing market, including rising prices on low transaction volumes, the recent pick-up in