CoreLogic’s preliminary auction results reveal a red hot market with the nation’s clearance rate hitting a new high of 86.1%, up from last week’s clearance rate of 83.8%: Sydney and Melbourne drove the result, both recording clearance rates above 87%: The strong clearance rate for Melbourne was curious given the city was forced into a
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.
CoreLogic has released its final auction clearance results for last weekend, which reveals that the nation’s clearance rate hit a 6-year high of 79.3%: Sydney’s final clearance rate was a red hot 84.4%, whereas Melbourne’s was also strong at 76.0%. Even the smaller capitals, which don’t run many auctions, reported strong results: The number of
The Anglosphere is at war with the CCP: In an apparent tit for tat move, BBC World News has been banned from airing in China, according to a statement from China’s National Radio and Television Administration (NRTA) on Thursday. The announcement comes one week after Ofcom, the British media regulator, said it had withdrawn a
One of the biggest side effects of the COVID-19 pandemic on the Australian property market is that it has reversed the trend towards apartment living. There are several drivers behind this trend. First, the collapse in immigration and international student numbers has dampened apartment demand in inner-cities. This is reflected by the sharp fall in
In Australia’s scab grab political economy, history (even recent history ) plays no role. It’s a shame because there are, in fact, three distinct phases of the development in the great Australian property bubble. If we understood each then we might end it. So ignorance must be manufactured such that vested interests can continue their
CoreLogic has released its 5-city dwelling values index for the week ended 11 February 2021, which shows that the property price boom is gathering pace, with dwelling values surging another 0.42%: It was the 17th consecutive weekly increase and also the strongest pace of growth since the week ended 28 November 2019. While all major
Late last year, the NSW Government announced brave changes to the state’s tax system that would offer owner-occupiers an alternative to stamp duty via a fixed $500 up-front fee plus an annual tax of 0.3% on unimproved land value. Under these changes, the buyer of an average Sydney house would have the choice to pay
CoreLogic’s Housing Market Update Report for February includes interesting data on Australia’s rental market, which is rebounding strongly from the soft conditions evident between 2018 and 2020. As illustrated in the next chart, rental growth nationally rebounded to 2.5% in the year to January 2021: Rental markets are tightening across most areas of Australia –
CoreLogic has released its Housing Market Update Report for February, which provides a bunch of key data pertaining to Australia’s property market. What sticks out most in this month’s report is the lack of homes listed for sale, which is tracking around 28% below the five year average: As shown above, there were only 131,657
The RBA has never directly acknowledged a single asset bubble that I can recall. So it’s not going to start now. The regime of Phil Lowe did spend the better part of five years keeping monetary policy too tight worrying about bubbles but all that achieved was structural lowflation. It is no surprise, therefore, today,
Via Banking Day: Greater Bank has set a new benchmark in the mortgage market, cutting its one-year fixed rate by 20 basis points to 1.69 per cent. Comparison site Canstar says this is the lowest mortgage rate in the market. Other low-rate lenders in the Canstar database include UBank, which is offering 1.75 per cent
Roy Morgan Research has released a new survey measuring mortgage stress across Australia. Roy Morgan measures mortgage stress in two ways: Borrowers are considered ‘At Risk’ if their mortgage repayments are greater than a certain percentage of net household income. Borrowers are considered ‘Extremely at Risk’ if the ‘interest only’ component of repayments are over
The federal government’s HomeBuilder subsidy had a tight 31 December deadline to qualify for $25,000 grants to underwrite the construction of new homes or major renovations. For all intents and purposes, it was a stonking success, resulting in an unprecedented 92% rise in new home sales in December as buyers rushed to meet the deadline.
Robert Gottliebsen claims that Australia faces a “landlord crisis” and escalating rents once the moratoriums that allowed residential tenants to defer their rent obligations for most of 2020 expire in late March. According to Gottliebsen, many landlords will either decide to sell their rental property or leave it vacant, and this will make the current
While the Australian property market as whole is on a tear, reporting strong growth across all major markets and regional areas, there are pockets where rents are going backwards and present great risks to budding property investors. In particular, high-rise apartments across Sydney and Melbourne are suffering from a strong supply response that has run
New data from the NSW Valuer-General shows that land values across NSW has risen to a record $1.8 trillion. The increase was fueled by regional NSW, where demand is red hot in the wake of COVID-19 shutdowns and the ‘work-from-home’ phenomenon. By contrast, some land values in Sydney’s CBD fell sharply over the year as
CoreLogic released its preliminary report for the weekend’s auctions, which reported more strong results. In particular, both Sydney and Melbourne reported preliminary clearance rates above 80%, which portends further price rises for both cities: This was off auction volumes that were slightly above the same weekend in 2019. As shown in the next chart, Australia’s
Is QE blowing Australian bubbles? The question has dogged the FOMC for many years. Now, with Australian QE into its second iteration already, the panic is building. Is it justified? Chris Joye argues not: The Reserve Bank of Australia has launched an entirely necessary monetary policy regime that will involve sustained quantitative easing (QE) to
Mortgage data for December published this week by the Australian Bureau of Statistics (ABS) revealed that first home buyer (FHB) is red hot, surging a whopping 61% year-on-year to 25% of all mortgages issued: The new home market is also booming on the back of surging FHB demand: The catalyst for this rise, outside of
CoreLogic has released its final auction clearance results for last weekend, which recorded the highest clearance rate in around four years: Melbourne and Sydney were the key drivers behind this lift: According to CoreLogic: There were 884 capital city homes taken to auction last week, up considerably from the same week last year when 625
For the rent-seekers in the property industry, no amount of taxpayer subsidies or interest rate cuts are ever enough. Despite the Australian property market defying the COVID-19 downturn thanks to massive taxpayer stimulus and RBA intervention in the mortgage market, which has driven first home buyer (FHB) demand to new highs: The Real Estate Institute
Via the good Captain today in Parliament: The RBA does not – and should not – target housing prices. Instead our focus is on the lending that is used to purchase housing. There are many moving parts here at present: record low interest rates; a shift in preferences towards houses and regional locations; large government
As expected, the Housing Industry Association (HIA) has used its pre-Budget submission to lobby for a return to mass immigration. The lobby group warns that the closure of Australia’s international borders will result in reduced demand for housing, which is in turn likely to see residential construction activity fall sharply in 2022. Master Builders Australia
In the week ended 4 February 2021, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, rose another 0.24%: It was the 16th straight weekly rise. All major markets recorded value rises: Quarterly values also continue to rise, again driven by the three smaller markets: However, annual price growth
Data from the Property Council of Australia (PCA) shows that the national office vacancy rate rose from 9.6% to a 24-year high of 11.7% in the six months to 31 January. The CBD vacancy rate rose to a six-year high of 11.1%. Sydney and Melbourne were the only major CBD office markets that recorded single-digit
The ME Quarterly Property Sentiment Report has been released, which gauges property market sentiment. In particularly, property investor sentiment has risen strongly, with 58% of investors positive in Q1 2021, up from 43% in Q4 2020 and a low of 34% in Q2 2020 (green below): 54% of investors also expect property prices to rise
Yesterday’s dwelling approvals data for December, released by the ABS, revealed that detached house approvals surged to their highest level in the series’ 38-year history: At the same time, however, unit & apartment approvals have retraced to around 2010 levels: The Housing Industry Association (HIA) explains this divergence as follows: “There is a divergence in
This week we received two key data inputs into the Australian property market: 1) the January price results from CoreLogic; and 2) December mortgage finance data from the Australian Bureau of Statistics (ABS). As regular readers know, we consider mortgage finance to be the best short-term predictor for property prices. This view is based on
Via Martin North: The latest results from our household surveys reveals that by the end of January 2021, overall levels of mortgage stress dropped below 40%, to 39.5% – still well above the level prior to the virus hitting. This is a consequence of lower mortgage rates following the RBA cash rate cuts, liquidity support
The Australian Bureau of Statistics (ABS) has released dwelling approvals data for the month of December. At the national level, the number of dwelling approvals rose by a seasonally adjusted 10.9% to 19,537. The overall rise in approvals was driven by house approvals, which surged by 15.8% whereas the volatile units & apartments segment only