CoreLogic released its auction report yesterday, which reported another fall in the preliminary national auction clearance rate to 67.8% from 69.4% last weekend, and remained well below the 74.4% recorded in the same weekend last year: Auction volumes nationally were 3,690 – way above the 2,253 recorded in the same weekend last year: As shown
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 After yesterday warning that “significant parts of the Sydney apartment market and the associated apartment land markets have cracked and are now suffering serious falls”, Gottiboff has returned with another dose of Sydney housing panic: …once the flower of confidence is badly damaged it takes a long while to restore. I
From CoreLogic’s Quarterly Housing & Economic Review, released yesterday: CoreLogic previously had concerns that heightened levels of new housing construction and investor participation would cause rents to fall and a year ago rental growth was slowing across most regions of the country. Over the past year though, there has been an acceleration in rental growth
By Leith van Onselen More evidence has emerged that Sydney’s housing boom looked cooked. CoreLogic’s dwelling values index has registered its sixth consecutive weekly decline in Sydney dwelling values, with values down a cumulative 0.6% over that 6-week period, with dwelling values also down 0.6% over the past 12-weeks: While this still represents a very
By Leith van Onselen In the week ended 26 October 2017, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, fell by 0.01%: Values fell in Sydney, Adelaide and Perth, were flat in Brisbane, but rose in Melbourne: So far in October, dwelling values have increased by 0.03%, with
By Martin North, cross-posted from the Digital Finance Analytics Blog: Traditionally in the Australian context loans to property investors have tended to perform better than loans to owner occupiers. This is because investors receive rental income streams to help pay for the mortgage costs, they are willing to carry the costs of the property against
By Leith van Onselen Following Kerry Stokes’ deluded call yesterday that “this is the best time” to buy Perth property and he “staked his reputation on it“, reality has returned with Perth developers offering hefty discounts and incentives to juice buyer demand amid falling prices and rents. From The ABC: At the northern end of
Via 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 the blows
Via Better Dwelling: Canadian real estate prices may be softening. Numbers from Teranet show that home prices generally declined across the country in September. This decline is led by a drop in prices around the Greater Toronto Area, extending through the Greater Golden Horseshoe. Although not all markets saw decline. Vancouver is once again leading the 11
By Leith van Onselen The June quarter consumer price index (CPI) data, released yesterday by the Australian Bureau of Statistics (ABS), revealed continued weak rental growth at the national capital city level. According to the ABS, rents nationally grew by just 0.2% over the September quarter of 2016 and by only 0.5% over the year
By Leith van Onselen Over the weekend, a group of so-called housing “experts” were asked to give their solutions to Sydney’s housing affordability crisis: RADICAL plans are needed to make Sydney property more affordable, experts say… The housing affordability crisis is one of the biggest topics of the #WTFAustralia campaign, which aims to start a
By Leith van Onselen The September quarter consumer price index (CPI) data, released today by the Australian Bureau of Statistics (ABS), revealed that annual rental growth at the national capital city level is at 23-year lows. According to the ABS, rents nationally grew by just 0.2% over the September quarter and by only 0.5% over
By Leith van Onselen Last month, it was estimated that the ‘Bank of mum and dad’ had become the fifth biggest mortgage lender in the country, with nearly one-third of first home buyers (FHBs) relying on parental assistance. Shortly after, the RBA released a research paper warning FHBs that receive financial assistance from their parents
Via Mortgage Parasite Australia: Banks are cracking down on loans to borrowers buying into Brisbane’s over-supplied apartment market, with a number of risky postcodes identified, which require bigger deposits. Four banks – Westpac, Suncorp, Australia and New Zealand Banking Group (ANZ), and National Australia Bank (NAB) – are restricting lending for certain Brisbane postcodes, where
From West Australian: Billionaire Kerry Stokes has added his weight to the view that conditions are ideal for entering the housing market, staking his reputation on now being the best time to take the plunge. The Seven Group Holdings and Seven West Media chairman said the situation came as the State showed it was recovering
By Leith van Onselen Remember when Treasurer Joe Hockey told first home buyers (FHBs) “to get a good job that pays good money” if they want to afford a home. Well, perhaps Hockey should have a chat to federal MP for Wills, Peter Khalil, whose family has been “effectively priced out” of Brusnwick in Melbourne’s
By Leith van Onselen Open borders extremist, Peter Martin, penned a curious article yesterday on how Sydney has “benefited” from extreme levels of immigration, which has forced locals to leave the city: Sydney is running a “population deficit” with the rest of the country, new census figures show. The figures for population movement released on
By Leith van Onselen The Productivity Commission’s (PC) latest report, entitled Shifting the Dial: 5 year productivity review, included a recommendation for states to shift from stamp duty to land taxes: Recommendation 4.8 Remove stamp duties and implement transition to land tax State and Territory Governments should move from stamp duties on residential and commercial
Via LF Economics: While our long-term charts on the housing market are often presented as indexes, it would be an interesting exercise to see the trends in prices over time. Real housing prices in Sydney and Melbourne were steady over the period 1880 – 1949, and then slowly increased over the decades during the social
Via the Herald Sun: MELBOURNE’S median house price will gain ground on Sydney’s in the coming years, hitting $940,000 in 2020, a new report predicts. The latest QBE Australian Housing Outlook has forecast the figure to rise 10.2 per cent in Melbourne over the next three financial years, while falling 0.2 per cent to $1.178
By Leith van Onselen The Housing Industry Association (HIA) has released its land sales report for the June quarter of 2017, which revealed a further divergence between vacant lot prices, which continue to climb to record highs, and the number of land sales, which remain stuck in the doldrums having fallen sharply over the past
By Leith van Onselen Following his deliberate obfuscation of housing affordability last week, Domainfax’s Peter Martin has penned another misleading article, entitled “Census 2016: Australians increasingly restless as half move home”, which misdiagnoses the reasons why Australians are moving more frequently: Almost half the Australian population has moved house during the past five years, one
Good news from CoreLogic. It’s Leading Mortgage Index keeps on fading through the Spring selling season: By this time last year it was rising smartly again. Moreover, Sydney mortgage belt clearance rates are clearly into price falls territory: As they fall, inner city prices will stall (and fall a bit too I reckon this time).
By Leith van Onselen The Real Estate Institute of Victoria (REIV) has delivered yet another whinge about the high cost of stamp duties in Melbourne, which it claims has eroded housing affordability. From News.com.au: A typical household now needs to spend 7.5 times its annual income to buy the average Melbourne home outright — up