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.


Full RP Data April house price release

By Leith van Onselen RP Data today officially released its dwelling values results for April, which registered a -0.5% decline at the 8-city levels, with all capitals, except Adelaide and Darwin, recording monthly falls (see next table). It was the first monthly decline in values since December 2012. While the monthly results were weak, the


New home sales recover lost ground

HIA new home sales are out today and recovered some of the ground lost in February: New home sales bounced back in March to maintain the modest recovery underway from the record lows reached in 2012, said the Housing Industry Association, the voice of Australia’s home building industry. The HIA New Home Sales report, a


Vendors lifted asking prices in April

From SQM Research comes its new Vendor asking price index for April. Vendors lifted their asking prices this month by 0.5% for houses and 0.9% for units. Year on year, asking prices for houses are up by 1.9% and units up by 2.6%. This follows on from the 1.3% increase in the March Quarter. Sydney, Perth and


State & territory stamp duty receipts tank

By Leith van Onselen The Australian Bureau of Statistics (ABS) yesterday released taxation statistics for the 2011-12 calendar year, which provided a key insight into why state budgets are coming under increasing pressure. According to the ABS, stamp duty receipts on housing transfers declined by -6% nationally in 2011-12 to $11,657 million, with receipts -18%


BIS warns of Melbourne office market “panic”

By Leith van Onselen Earlier this month, Morgan Stanley released detailed analysis pointing to a big ramp-up in office construction and office vacancy rates in Melbourne over the next couple of years. Now Property Observer has published research from BIS Shrapnel showing Melbourne office vacancy rates on the rise, which could potentially lead to market


Mortgage credit growth has bottomed

By Leith van Onselen The Reserve Bank of Australia (RBA) has just released the private sector credit aggregates data for the month of March: Total credit provided to the private sector by financial intermediaries rose by 0.2 per cent over March 2013 after increasing by 0.2 per cent over February. Over the year to March,


Negative gearing losses jump

By Leith van Onselen The Australian Taxation Office (ATO) has just released its 2010-11 Taxation Statistics, which once again revealed Australia is a nation of loss-making landlords, with both the number of property investors and the amount of tax losses increasing over the tax year. According to the ATO, there were 1,811,174 property investors in


FHB changes in Victoria get mixed reception

By Leith van Onselen The weekend’s announced changes to the Victorian First Home Owners Grant (FHOG), which will see the $7,000 grant on pre-existing dwellings abolished on 1 July 2013 in favour of an expanded $10,000 grant on new builds, has received a mixed reception from the Property Industry. As expected, the Real Estate Institute


Weekly RP Data property wrap

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 28 April 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;


Auction clearances firm

By Leith van Onselen The auction clearance rate in Australia’s biggest auction market – Melbourne – jumped over the weekend, with 71% of the 716 auctions reported to the REIV selling, with 52 auctions still listed as “no result”, which will likely lead to some minor downward revisions to the clearance rate as the missing


How mining saved housing

By Leith van Onselen Dr Nigel Stapledon, Associate Head of Economics at the University of New South Wales, gave the above interview on Friday afternoon on ABC News 24. In the interview, Dr Stapledon argues that Australia’s housing market was sparred a nasty correction in the mid-2000s by the once-in-a-century resources boom. It’s a view


Victoria slashes first home buyer grant

By Leith van Onselen Yesterday, it was revealed that the Victorian Government will follow the lead of both New South Wales and Queensland and remove the First Home Owners’ Grant (FHOG) on pre-existing dwellings, replacing it with an increased subsidy on newly built dwellings as well as expediting the phase-in of stamp duty cuts. From


REINSW demands FHB subsidies

By Leith van Onselen Following the dramatic slump in New South Wales and Queensland first home buyer (FHB) mortgage commitments in January and February (see below chart), which came after both states removed the first home owners’ grant (FHOG) on pre-existing dwellings in October 2012, I noted to “expect housing industry calls for the FHB


Lend Lease super sizes homes as sales die

By Leith van Onselen Recent data has not been kind for developers is South East Queensland (SEQ). According to RP Data-Rismark, Brisbane and Gold Coast dwellings have fallen by around 10.5% since peak: First home buyer (FHB) mortgage demand has fallen off a cliff since the Queensland Government removed the FHB on pre-existing dwellings in


Weekly RP Data house price update

By Leith van Onselen In the week ended 25 April 2013, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, recorded a -0.34% fall, which followed last week’s 0.20% decline (see next chart). All major capitals, except Adelaide, recorded declines (see next chart). Values are down -0.56% so


Canstar slams Aussie housing affordability

By Leith van Onselen Above is a video interview on Yahoo Finance with Canstar’s Steve Mickenbecker discussing Australian housing affordability. In the video, Mickenbecker argues that Australians are devoting a much larger proportion of their budget towards meeting their home loan repayments than they were 10 years ago. Over the past decade, wages nationally rose


APM: House prices up, units prices down

By Leith van Onselen Australian Property Monitors (APM) has released its March quarter house and unit price results (below), which recorded a 1.7% increase in house prices over the quarter at the national capital city level, but a -0.7% fall in national capital city unit prices. In the year to March 2013, APM recorded a


RBA drops the ball on housing supply (again!)

By Leith van Onselen Last month, RBA Assistant Governor, Christopher Kent, gave a speech entitled Recent Developments in the Australian Housing Market, which contained a number of erroneous statements about land/housing supply (click to read my critique). Yesterday, the RBA’s Head of Financial Stability, Luci Ellis followed up with a speech entitled Housing and Mortgage Markets:


Residex sees multi-speed housing market

By Leith van Onselen Residex’s founder, John Edwards, has just released its quarterly housing market update, which paints a multi-speed picture of the Australian housing market. Let’s take a look. As housing markets grow in strength I am again drawn to the issues and problems associated with the Reserve Bank’s single tool of economic management


Weekly RP Data Property Wrap

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 April 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;


Is Australia’s apartment boom set to wane?

By Leith van Onselen Much has been written about Australia’s new found embrace of apartment living, whereby more and more Australians are supposedly “chosing” the convenience of inner-city apartment living over a traditional detached house in the suburbs. Certainly, recent construction data released by the Australian Bureau of Statistics seems to support this contention, with


Construction industry slams costs, ignores land

By Leith van Onselen The Herald-Sun has today run an article lamenting escalating construction costs, which is causing stagnation across Melbourne’s building industry: By most accounts, the state’s property and construction sectors are stagnating, with some analysts even declaring they are in turmoil. Melbourne’s strong suit – being a liveable metropolis with plentiful and relatively


Auction clearances mixed

By Leith van Onselen The auction clearance rate in Australia’s biggest auction market – Melbourne – fell over the weekend, with 66% of the 575 auctions reported to the REIV selling, with 29 auctions still listed as “no result”, which will likely lead to some minor downward revisions to the clearance rate as the missing