By Leith van Onselen Yesterday’s dwelling approvals data for September from the ABS reported a continued fall in annual unit & apartment approvals: To add more colour to this series, I have once again plotted the breakdown of approvals by type for each of the states and territories, which are presented below in rolling annual
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 More evidence has emerged that Sydney’s housing boom looked cooked. CoreLogic’s dwelling values index has registered its eighth consecutive weekly decline in Sydney dwelling values, with values down a cumulative 0.7% over that 8-week period, with dwelling values also down 0.7% over the past 13-weeks: Sydney’s quarterly growth rate continues to
By Leith van Onselen In the week ended 2 November 2017, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, fell by 0.03%: Values fell in Sydney but rose in the other major capitals: So far in 2017, values have risen by 4.9% driven overwhelmingly by Melbourne followed by
By Martin North, cross-posted from the Digital Finance Analytics Blog: Digital Finance Analytics has released the October 2017 Mortgage Stress and Default Analysis update. Across Australia, more than 910,000 households are estimated to be now in mortgage stress (last month 905,000) and more than 21,000 of these in severe stress, up by 3,000 from last
By Leith van Onselen The Australian Bureau of Statistics (ABS) has released dwelling approvals data for the month of September. At the national level, the number of dwelling approvals rose by a seasonally adjusted 1.5% to 18,849. The overall rise was driven by the volatile unit & apartment market (+2.6%), whereas house approvals rose by
By Leith van Onselen After last week’s Productivity Commission (PC) report included a recommendation for the states to shift from stamp duty to land taxes, and the property lobby endorsed the idea, attention has turned to how the reform could be implemented in practice. Kevin Davis, research director of the Australian Centre of Financial Studies,
By Leith van Onselen A new report has been released which argues that high-density living is less environmentally friendly than suburban living. From All Homes: In a revelation that challenges the long-held assumption that it’s more efficient to reside in a vertical village than a horizontal one, the three-year US study shows that apartment dwellers
Great stuff from the legend: Here’s why she is spot on, Maslow’s hierarchy of needs: At the base of all human well-being is the house: food, water, warmth, rest, security and safety. If your society is not providing that to as many people as possible – especially future children – then, frankly, it’s a failure.
Doesn’t happen every day, via Domainfax: A global investment bank has called the end of Australia’s world record housing boom, saying the golden years are “officially” over after home prices fell in Sydney for the second month in a row. “There is now a persistent and sharp slowdown unfolding”, ending 55 years of unprecedented growth that has seen
Via The Australian: Values could fall about 10 to 15 per cent from peak to trough and then remain fairly flat for a few years, based on past experience, Mr Kusher said. The apartment market could weaken more than detached houses if a lot of investors choose to sell, he said, adding that if investors
By Leith van Onselen From mouthpiece Robert Gottliebsen, comes the threat that Highrise Harry Triguboff will cease building apartments for rent if the NSW Government implements rental reforms to improve security of tenure: NSW politicians are looking to follow Victoria and are considering draconian new laws to hit residential property investors even harder… Triguboff has
By Leith van Onselen Following on from yesterday’s post on CoreLogic’s daily dwelling values index results for October, CoreLogic has released its full results, which also cover the smaller capitals and regional areas (see next table). As shown above, the smaller capitals and the regions had a mixed month, with Hobart recording a solid rise
Blackrock CEO Larry Fink thinks so: “The biggest problem you have in Australia is the amount of leverage that’s in real estate. I don’t see a housing bubble. “You have a housing bubble if your economy sputters, you have a housing bubble if you reduce immigration. “If you allow immigration you have new entrants in society who
CoreLogic’s Cameron Kusher has penned another interesting blog post examining ‘shrinkflation’ – the unusual phenomenon whereby transaction volumes are falling at the same time as dwelling values are rising – with the bubble epicentres of Sydney and Melbourne leading the way: Despite a surging population and record high levels of new construction, a lower proportion
By Leith van Onselen From SQM Research comes stock on market figures for the month of October, which reported a 1.4% decline in listings over the month and a 4.6% decrease over the year: Listings fell across all jurisdictions in October except Sydney, Adelaide and Canberra. Over the year, the decline in listings nationally was
By Leith van Onselen The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of September 2017: A chart showing the long-run breakdown in the components is provided below: Personal credit growth (0.0% MoM; -0.3% QoQ; -1.0% YoY) is still in the gutter, whereas business credit growth (0.1%
Via APRA’s monthly banking statistics for the big eight banks and investor loans: ANZ CBA MQG NAB WBC BOQ BEN SUN Total Sep-17 82560 133898 8214 104216 149215 11125 11740 11868 Sep-17 512836 Aug-17 82505 134289 8296 103952 148528 11116 11709 12070 Aug-17 512465 Jul-17 82662 134764 8565 103564 147645 11103 11772 11967 Jul-17 512042
From The HIA: “The decline in new home sales which commenced in 2015 has continued with a 6.1 per cent reduction during September 2017,” remarked HIA Senior Economist, Shane Garrett. The results are contained in the latest edition of the HIA New Home Sales Report the market’s leading gauge of sales activity in residential building
By Leith van Onselen CoreLogic’s dwelling price results are in for October, with a -0.01% decrease in values recorded over the month at the 5-city level, driven overwhelmingly by diverging fortunes in Sydney and Melbourne: Values growth continues to trend lower following the turbo-charged growth recorded over the 2016-17 financial year: Quarterly value growth is
CoreLogic’s Cameron Kusher has penned a blog post showing how housing affordability worsened over the June quarter, driven by Sydney and Melbourne: The latest data to June 2017 indicates that, despite the cash rate remaining stable at record lows, housing affordability has generally worsened over the most recent quarter. The changes in affordability at a
By Martin North, cross-posted from the Digital Finance Analytics Blog: The ABS published some revisions to their Household Income and Wealth statistics. Two data series stood out for me. First, more households are in debt today, compared with 2005-6, and second more households have debts at more than three times their income. Here is the
By Leith van Onselen On Friday, the Australian Bureau of Statistics (ABS) released its 2016-17 Australian System of National Accounts (ASNA) data release, which provides a detailed presentation of annual national accounts data. Locked away on Table 61 is my favourite section of the release: data on aggregate land values at the state and national
Last week from Gottiboff: Significant parts of the Sydney apartment market and the associated apartment land markets have cracked and are now suffering serious falls. The level of decline is much greater than most were predicting three to six months ago. The repercussions of what has happened in Sydney will quickly spread to Melbourne, although
From McGrathmaggeddon: Sydney’s once red-hot housing market is likely to see prices plateau or fall up to 5 per cent next year, though if there were a spike in interest rates we could see a “double digit” correction, according to veteran real estate agent John McGrath. Speaking ahead of the release of the group’s annual