By Leith van Onselen The auction clearance rate in Victoria remained just above 60% over the weekend on large volumes, although there were once again a significant number of unreported results that are likely to push the clearance rate lower as late resultsare chased-up. The Real Estate Institute of Victoria (REIV) reported a provisional auction
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 March 2010, just before Australian house prices peaked, the Sunday Telegraph published an article citing Commsec research showing the sharp deterioration of housing affordability over the past 50 years: AUSTRALIANS have to work almost three times harder to pay off the average family home than they did 50 years ago.
By Leith van Onselen Last month, the Australian Bureau of Statistics (ABS) released the annual national accounts, which contained land values data for each of Australia’s states and territories, as well as nationally. This data showed that Australian residential land values relative to GDP had deflated further to 1.90 times GDP in June 2012 from
By Leith van Onselen It seems the RP Data-Rismark’s capital city home values indices is no longer a daily index! The index did not update for three straight days (18, 19 and 20 November) and was finally updated today (see above). However, the back data is curiously missing data for 18 and 19 November (see
By Leith van Onselen Catherine Cashmore published an interesting article yesterday at Property Observer questioning whether house prices in Australia can forever out-pace inflation: …we’re reaching that time of year where real estate pundits will dust off the crystal ball and make some future predictions into 2013 – not that we haven’t had a fair
By Leith van Onselen Missed this one yesterday. SQM Research has revealed via the AFR that it will shortly release a new vendor asking price index that will track housing market sentiment by tracking how optimistic sellers are about selling prices. SQM will monitor a number of major real estate classifieds websites, and chart the
By Leith van Onselen Following on from yesterday’s post questioning whether housing construction can recover enough to fill the void left as the mining investment boom unwinds from 2013, Bank of America Merrill Lynch has written an interesting report also arguing that the recovery in building construction will be “relatively moderate” as interest rates are
By Leith van Onselen Fairfax’s Matthew Kidman has today published an interesting article weighing-up whether housing construction can recover enough to fill the void left as the mining investment boom unwinds from 2013. Let’s take a look: CAN the Australian housing market recover as it has in the past or is it different this time?
By Leith van Onselen The auction clearance rate in Victoria rebounded over the weekend on large auction volumes, although the high number of undisclosed results is likely to see the clearance rate downgraded over the week as late results are chased-up. The Real Estate Institute of Victoria (REIV) reported a provisional auction clearance rate of
The Westpac Red Book for October is out and paints a picture of housing market sentiment turning strongly upwards: One of the highlights in last month’s survey was a big 9.6% jump in the sub-index tracking views on ‘time to buy a dwelling’ to the highest level since Sep 2009, and prior to the 2009 recovery, since Dec 2001.
By Leith van Onselen SQM Research has just released rental vacancy data for the month of October 2012, which revealed little change over the month: The key points from the release are: Nationally, vacancies stagnated during October, with a mere difference of 560 vacancies, coming to a total of 49,104 and a national vacancy rate
By Leith van Onselen ‘Underlying demand’ (or ‘pent-up’ demand) is the common methodology used in calculating whether there is a housing shortage. Put simply, underlying demand estimates what the demand for newly-built housing might be given the growth in population, trends in household size, demand for second (or holiday) homes, and economic conditions (e.g. employment,
By Leith van Onselen Please find above RP Data’s November housing market update, which analyses the nation’s housing market as at the end of October when dwelling values declined by -1.0% over the month. As always, there are some interesting tidbits of information, including: 1. The recent pick-up in sales volumes, which are tracking 15%
Please find below Nathan Webb’s analysis of the latest AFG housing finance data. I’ve had a bit of a hiatus from charting, while helping my wife to look after the newest addition to our family. So I’ll have to keep it brief, lest I’m needed to do some cuddling. The AFG mortgage volumes for September
Find below Genworth’s latest mortgage industry survey which shows very depressed lenders combined with a very enthusiastic brokers, among other discussion worthy factoids: Lending slows in 2012, with most lenders expecting continued reductions in credit growth ahead • The majority of lenders have experienced slow credit growth over the past year. • Queensland lenders have struggled over
By Leith van Onselen Last month, I wrote an article in MacroInvestor entitled Beware the house and land value trap, which examined the pitfalls of buying new house and land packages on the fringes of Australia’s capital cities. The article was particularly critical of measures adopted by Australia’s property developers aimed at reinvigorating new home
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 October. According to DERM, the number of housing transfers and mortgage lodgements rose by 21.2% and 18.7% respectively in October 2012, and were up 35.9% and 23.9% respectively on
Find below a speech this afternoon by Jonathon Kearns, Head of Economic Analysis at the RBA, on the outlook for dwelling investment. The Outlook for Dwelling Investment Jonathan Kearns* Head of Economic Analysis Address to the Australian Business Economists’ Lunchtime Briefing Sydney – 13 November 2012 Housing is important to all of us as a place to
By Leith van Onselen While housing finance data continues to improve, housing construction data is weakening, with the release of quarterly construction materials volumes by the Australian Bureau of Statistics on Friday showing further weakness in volumes of concrete blocks, clay bricks and roof tiles – materials typically used in housing construction (see below chart).
By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released housing finance data for the month of September, which registered a seasonally-adjusted 0.9% increase in the number of owner-occupied finance commitments over the month. August’s results were also revised up by 0.4%: Arguably, the most important figure in the release is the
By Leith van Onselen Goldman Sachs last week released an interesting report (below) on the stark differences that have emerged across developed country housing markets. The report essentially seperates the preformance of various housing markets into two distinct categories: ‘housing high-flyers’:where real house prices have increased strongly and are up cumulatively since Q1 2009; and
By Leith van Onselen The auction clearance rate fell in Victoria over the weekend, with the number of auctions up significantly on the prior week’s action, which was interrupted by the Spring Racing Carnival. The Real Estate Institute of New South Wales (REINSW) has not updated its auctions data for the weekend, precluding us from
By Leith van Onselen The cash-strapped and stamp duty-addicted Victorian Government might breathe a sigh of relief after Department of Sustainability and Environment (DSE) released data revealing a big surge in housing transfers in the month of October. It was the highest number of October transfers since 2009, with 15,336 homes changing hands, up 26%
NAB’s quarterly commercial property survey continued to deteriorate in the September quarter, not that you’d know it from A-REIT prices: NAB Commercial Property Index hits new low of -19 points in Q3’12 as domestic economy passes through a soft patch with business conditions weaker and forward indicators concerning. Retail participants least optimistic, but expectations soften most in
The HIA has an interesting new report out this morning. the report is long on rhetoric but rather short on evidence, sadly. It offers the following reasons for the struggle reinvigorate new home sales: Are The Ingredients There For A Recovery? At face value the ingredients are there for a recovery in new home building
By Leith van Onselen RP Data this week released its Buy versus Rent Report for October (available for download here), which has received some positive press for the seemingly large increase in the number of locations where it is supposedly cheaper to buy than rent – from 238 suburbs and towns in August 2012 to
The ABS quarterly house price data is out for the September quarter and prices were up 0.3%. The June quarter was revised up from 0.5% to 0.6%. Year on year prices were also up 0.3% . The prior quarter was also revised up from -2.1% revised up -1.9. Here is the year on year chart: And the
By Leith van Onselen Auction clearance rates fell slightly in Australia’s two largest markets, with the number of auctions held down significantly on last weekend’s “Super Saturday” volumes. In New South Wales, a preliminary auction clearance rate of 60% was recorded from 563 auctions reported to the Real Estate Institute of New South Wales (REINSW).
By Leith van Onselen SQM Research has released its stock on market figures for the month of October, which registered virtually no change over the month nationally, but a -2.7% decrease in the number of homes for sale over the year: Here’s the national chart, which shows that stock levels have been steady for the