From Banking Day: The self-managed superannuation loan market is worth A$6 billion to $7 billion, with about 30,000 funds currently borrowing to buy property, according to Westpac. The head of the SMSF trustee division at Westpac, Sinclair Taylor, said Westpac and St George had a combined SMSF loan book of around $2 billion, giving it
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.
Cross-posted from Ross Elliott at The Pulse It’s an axiom of economics 101 that to decrease demand for something, you increase its price. The advent of upfront, per-dwelling infrastructure levies in the early 2000s had a direct price impact on new housing, as did the GST, along with a range of other additional ‘innovations’ in
The July MB members special report is out this morning, available in the Forum. “Perth property: The mining canary” is the first in a new special series of city specific reports on Australian property in the post mining boom period. The Perth property market is caught in intensifying cross-currents as an iron ore investment bust vies
By Leith van Onselen Yesterday, RP Data’s Cameron Kusher tweeted that the value of Australian housing stock had hit round $4.8 trillion at the end of 2012. A quick glance at a PowerPoint presentation released earlier in the year by RP Data also shows that Australia’s housing stock was worth roughly 3.5 times Australia’s total superannuation
By Leith van Onselen Reported auction clearance rates in Australia’s two biggest markets were mixed over the weekend, with Melbourne’s auction market weakening and Sydney’s seemingly continuing to boom. In Australia’s biggest auction market – Melbourne – clearances fell to 70% on 426 auctions reported to the REIV, with only 7 auctions listed as “no
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 21 July 2013. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates Latest median house & unit prices; Average time on market & vendor discounts;;
By Leith van Onselen The release on Wednesday of the March quarter dwelling commencements and completions data (analysed here and here) has enabled me to update charts tracking quarterly approvals, commencements, and completions against Australia’s population growth, which provides an indication of the extent to which housing construction is currently lacking. First, the below chart
By Leith van Onselen In the week ended 18 July 2013, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, recorded a 0.20% increase. It was the sixth consecutive weekly rise in values (see next chart). Gains were recorded in all major capitals, except Adelaide (see next chart).
By Leith van Onselen The ABC has today published an interesting article on Perth’s sharply slowing rental market, where rental vacancies have doubled over the past six months, as have the number of tenants breaking their leases: Not so long ago real estate agents were reporting queues of prospective tenants at home opens and people
By Leith van Onselen Earlier in the week, I lamented how how the issue of housing affordability has received next to no attention from Australia’s politicians in the lead-up to the Federal election, and pointed out the Coalition’s 2010 housing policy, which contained many sensible statements on freeing-up the supply-side of the market in order
By Leith van Onselen Find below a new report by RP Data’s Cameron Kusher examining the relationship between initial listing prices, sale times, and the final sale price: “Getting the price right in the first place is imperative – you can sell quicker and move on to your next property. Holding out for a better
By Leith van Onselen Back in May, I asked whether it was time to sell Canberra housing, based on the Coalition’s pledge to axe 12,000 public servants from the Federal bureaucracy, as well as the potential oversupply of homes stemming from the recent surge in apartment construction. Now it appears that our own Prime Minister,
By Leith van Onselen I only just realised that today’s Building Activity data released by the Australian Bureau of Statistics (ABS) also contained dwelling commencements figures for the March quarter of 2013 (these used to be contained in a seperate release), which provides a more forward looking assessment of the state of the housing construction
By Leith van Onselen The RBA and Treasury’s plan for housing construction to fill the void as the mining investment boom unwinds took another hit today, with dwelling completions data for the March quarter of 2013, released by the Australian Bureau of Statistics (ABS), showing minimal uplift. In fact, according to the ABS, the total
By Leith van Onselen Bob Beaumont, managing director of Beaumont Tiles, an Adelaide-based family-owned company, has today written an excellent article in The Australian arguing how exorbitant land prices are killing the dream of home ownership and ruining the house construction industry: WITH the resources boom a fast-fading memory, the Reserve Bank is resting its
Cross-posted from David Collyer at Prosper ‘A Guide to Property Values 2012’ by Victoria’s Valuer General was released July 5. It has been comprehensively ignored. The report dissects property transfers and prices lodged with the titles office. This dataset is the actuals, the definitive historical record, and is what scholars of the future will use
By Leith van Onselen SQM Research has today released rental vacancies data for the month of June, which revealed another rise in the rental vacancy rate to 2.2% nationally from 2.1% in May and 2.0% in June 2012: According to SQM, there is now the likelihood that rental growth nationally will slow to a crawl:
By Leith van Onselen Yesterday’s article, Aussie politicians MIA on housing, lamented how the issue of housing affordability has received next to no attention from Australia’s politicians in the lead-up to the Federal election. After posting the article, a reader sent me through the Coalition’s 2010 housing policy (below) which, while stating nothing about curbing
By Leith van Onselen The Queensland Government has released data on housing transfers and mortgage lodgements for the month of June. According to the Government, the number of housing transfers rose by 8.1% in June, whereas the number of mortgage lodgements increased by 7.5% over the month. On a year-on-year basis, transfers rose by 32.5%
By Leith van Onselen The Housing Industry Association (HIA) has today issued a media release looking at the state of dwelling construction across Australia prior to tommorow’s data on March quarter dwelling commencements by the Australian Bureau of Statistics. According to the HIA, although dwelling construction appears to be experiencing a small cyclical recovery, it
Plenty of headlines around this morning after Moody’s declared the obvious: that Australian banks will get hit if house prices fall. This was Moody’s Analytics, BTW, a separate division to the credit ratings agency. Actually, the report was pretty sensible. It was more sanguine about Australian growth than I am but picked up all the
By Leith van Onselen News Limited has today run a series of articles (for example here, here and here) questioning why the issue of housing affordability has received next to no attention from Australia’s politicians in the lead-up to the Federal election. According to News Limited, housing affordability is a key issue amongst voters –
By Leith van Onselen Reported auction clearance rates in Australia’s two biggest markets – Sydney and Melbourne – strengthened over the weekend, although auction volumes remained fairly low. In Australia’s biggest auction market – Melbourne – clearances rose to 76% on 354 auctions reported to the REIV, with only 6 auctions listed as “no result”
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 14 July 2013. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates Latest median house & unit prices; Average time on market & vendor discounts;;
By Leith van Onselen RP Data has released its Buy versus Rent Report for July 2013 (available for download here), which has once again received positive press for the seemingly large increase in the number of locations where it is supposedly cheaper to buy than rent – from 179 suburbs and towns in June 2012
From Westpac this afternoon, the quarterly consumer house price expectations survey: • The Westpac-Melbourne Institute Consumer House Price Expectations Index moved lower in Jul from 53.9 in Apr to 46.9. That marks a softening in the upbeat expectation for prices although most Australians still expect house prices to move higher over the next 12mths. •
There seems to be a bit of angst in the comments around today’s housing finance numbers representing some new surge in property prices. May was a good month but to my mind the recovery remains muted and vulnerable to reversal. The current uplift in mortgage issuance was foreshadowed in the RPData Mortgage Index (RMI), which
By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released housing finance data for the month of May, which registered a seasonally-adjusted 1.8% increase in the number of owner-occupied finance commitments over the month. It was the fourth consecutive increase in owner-occupied commitments, but missed analyst’s expectations of a 2.2% rise. The