Australian Property

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.


Housing swallows economy

By Leith van Onselen RPData, provided and interesting tidbit of information in its 2012 Capital Markets Report (available for download here), where it noted [my emphasis]: The Australian housing sector is the country’s largest and, arguably, most important asset class. The total value of homes across the country as at December 2011 was $4.54 trillion.


It’s hip to be bear

By Leith van Onselen For me, one of the most interesting aspects arising from following the Australian housing market over the past couple of years has been the widespread change in media and public sentiment towards the state of the market. Since writing my first ever post warning of a housing bubble in May 2010


QLD leads fall in dwelling commencements

By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released dwelling unit commencements data for the December quarter, and it’s another poor result. In seasonal adjusted terms, total dwelling unit commencements fell by -6.9% in the December 2011 quarter, which follows a -6.0% fall in the September quarter. In the 12 months


Leith van Onselen vs Chris Joye

MacroBusiness Senior Economist Leith van Onselen was interviewed again by the ABC’s The Business program last night on the housing finance figures (covered by him yesterday here) and the outlook for property prices in 2012, alongside Rismark’s executive director Chris Joye. Here’s the video – Analysts divided:


Housing finance flatlines in January

The ABS released Housing Finance figures for January this morning: The total value of dwelling commitments excluding alterations and additions (trend) rose 0.6% in January 2012 compared with December 2011, while the seasonally adjusted series fell 2.3% in January 2012. The total value of owner occupied housing commitments (trend) rose (up $110m, 0.8%) in January


Queensland mortgage volumes remains weak

By Leith van Onselen Following on from yesterday’s State Government data showing the depressed state of Victorian housing transfers and mortgage finance commitments, below are some charts showing similar trends for Queensland taken from Department of Environment and Resource Management (DERM) data on housing transfers and mortgage lodgements. Like the Victorian Department of Sustainability and


RPData’s March Update

RPData‘s latest market wrap is out and the news is much the same as last week. Auction clearance rates hovering around the 50% mark, stock on market continuing to climb, while the rental market treads water: The Reserve Bank’s (RBA) board met on Tuesday and decided to keep official interest rates on hold at 4.25%.


Home sales lowest since 1996

By Leith van Onselen From Property Observor today comes this gem from RP Data, showing that the volume of home sales in calender year 2011 was the lowest in 15 years: The number of property transactions in 2011 was the lowest number of calendar year sales since 1996. The annual volume of sales across the


Victorian mortgage growth still weak

By Leith van Onselen With the Australian Bureau of Statistics (ABS) scheduled to release the January Housing Finance data tomorrow, I thought it would be worthwhile to update readers on recently released Victorian Department of Sustainability & Environment (DSE) data for the month of February, which shows continued weakness in the number of housing transfers


AFG shows steady housing market

Please find below another guest post from MacroBusiness reader, Nathan Webb, examining the latest AFG housing finance numbers. Nathan’s previous post on the AFG data can be viewed here. A few weeks back saw the release of AFG’s mortgage sales volumes.  As most expected, there was a large jump from the January and December figures


S&P warns on China risk to house prices

By Leith van Onselen From S&P comes the following warning on Australian house prices: Australian house prices could decline by more than 5% in 2012 if China’s economy experiences a soft landing with GDP growth at about 8%, according to Standard & Poor’s. But in the event of the less-likely scenario, under which China’s economy


Australia’s stale houses

By Leith van Onselen From Australian Property Monitors (APM) via Property Observor comes the below table showing the average number of days taken to sell a home in each capital city.   Amazingly, in four of the six capital cities, it took on average of more than 100 days to sell a home as at


Insiders maul R.P.Data’s daily house price index

It is been some time since we have been able to view the spectacle of  the Australian data providers having a stoush over their data provision methodologies. But have no fear, SQM Research‘s Louis Christopher appears to be ready for another round with an appraisal of RPData/Rismark’s new daily index in his latest newsletter. I have added


Stock on market rises in major centres

Last week RPData reported that their measure of ‘Stock on Market’ was continuing to see upwards pressure: The number of newly advertised properties for sale increased again last week, the sixth consecutive week they have done so. Although new listings continue to climb to higher levels, the number of homes being added to the market


Australian vs Canadian property

By Leith van Onselen Following on from Monday’s post, Canada’s bubble goes mainstream, Canada’s leading current affairs magazine,, has published its March housing bubble report (front cover above), entitled Time to panic about the housing market: why is everyone ignoring the unfolding disaster? Let’s take a look. Back in the heady days of 2005, America looked like


Weekend reading from RPData

RP Data‘s latest market wrap came out on Friday. It’s Sunday, so you’re on your own with it. RP Data, along with Rismark International, launched two world firsts this week: the first daily ‘real time’ index tracking changes in housing values and the first housing market index that tracks the performance of the entire ‘portfolio’


R.P.Data’s missing January

Given that RPData gave the housing market a little shock yesterday with the launch of their new daily index it appears that there is no data for January to report. In fact it appears to have received barely a passing mention in most media reports: Melbourne led a rebound in capital city dwelling prices in February,


Correction: AFG was not so hot

Right…straight out I’m a dunce , and a huge apology all round.  Yesterday I made a pretty serious error while transposing data from the AFG reports to the spreadsheet I use to generate my charts. In doing so I mixed February’s data for Victoria and Queensland which produced results which were … well completely incorrect.


Did falling LVRs drive a mortgage surge?

Below is a report produced by interest rate aggregator, Is this where the February mortgage surge came from? More doors open to potential home owners in 2012 69% of home loans offering LVR 95% and higher Lowest number of home buyers in over a decade But borrowers need to be careful: bigger mortgage means


Building approvals rise in January

The shock and awe continues, with building approval numbers up nationally, mainly thanks to NSW. Private sector house approvals fell 0.1% (i.e flat) overall, and residential building values only rose 1.1% for the month: ABS Building Approvals show that the number of dwellings approved rose 0.9% in January 2012, in seasonally adjusted terms, following a


House prices by state

Above, find the house price movements for February. There are a few eye-popping numbers, not least being Melbourne up 1.84% on the month and Perth down 1.8%. It’s possible to construct a favourable narrative for Sydney given the recent FHB activity, but some of these others look in need of smoothing. I know these are February


House prices rise in February

From BS: Home prices in capital cities rose in February, offsetting a weaker period in January, according to a leading survey. The RP Data-Rismark hedonic home value index showed capital city house prices rose 0.8 per cent in February. The result follows a fall in values of one per cent in January. RP Data-Rismark have


More on the new home sales rout

There are some very significant not to mention familiar divergences in todays very weak new home sales result from the HIA. Here’s a little more on the state by state breakup, as well as houses versus units. The weakness in houses is especially apparent in VIC: And NSW: QLD and SA are moderately depressed and


Mortgage aggregates hold up

Earlier today the RBA released its credit aggregates, which includes the closely watched housing credit series of data. On a month by month basis, January was an improvement on December but both owner occupiers and investor credit remain within the bounds of the last 12 months, which saw house prices fall: The current year on year


Chris Joye responds to Jeremy Grantham

Given yesterday’s post on the ongoing stoush between Chris Joye and Jeremy Grantham I thought it only fair that Mr Joye be given the opportunity to respond so here it is: “The $100 million challenge”. Today I want to talk about our $100 million housing challenge to the US fund manager, Jeremy Grantham, and a


Jeremy Grantham vs Christopher Joye redux

Regular readers will be more than familiar with my friend and fellow blogger Christopher Joye, emeritus General Manager at Rismark and creator of Australia’s leading house price measure, the R.P.Data/Rismark Home Value Index. We might also recall Mr Joye as Australia’s leading bullhawk, that curious breed of animal that simultaneously embraces both higher interest rates


Housing affordability rises to 2003 trough!

The HIA released its quarterly housing affordability index and it’s good news, with four staright quarters of cheaper house buying: A lift in housing affordability in the December 2011 quarter marks four straight quarters of improvement, meaning conditions are steadily getting better for those trying to enter home ownership says the Housing Industry Association, the


The RBA takes the credit

Find below a speech today by the RBA’s Head of Financial Stability, Luci Ellis, with commentary. PRUDENT MORTGAGE LENDING STANDARDS  HELP ENSURE FINANCIAL STABILITY  Good morning, and thank you to RFi for the opportunity to speak to you today. Property markets and financial stability are both topics that are dear to my heart, and I hope to