CoreLogic released its auction report yesterday, which reported a small fall in the preliminary national auction clearance rate to 63.1% from 63.5% last weekend, and remained well below the 71.6% recorded in the same weekend last year: Auction volumes nationally were 3,353 – slightly above the 3,432 recorded in the same weekend last year: As
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 Today’s housing finance data for October posted another 1.5% fall in the number of new home finance commitments (both construction and new), although commitments were still up by 12.1% over the year: Looking at the state-by-state breakdown, which is presented below on a rolling annual basis since it is not seasonally
By Leith van Onselen Today’s housing finance data for October, released by the Australian Bureau of Statistics (ABS), posted a fall in lending to owner-occupiers but an increase in lending to investors. According to the ABS, the total number of owner-occupier finance commitments (excluding refinancings) fell by 0.8% in October in seasonally adjusted terms but
By Leith van Onselen The Reserve Bank of Australia (RBA) has released a Bulletin Article examining housing accessibility for first home buyers (FHBs), which finds that accessibility is especially poor in the immigration/investor hotspots of Sydney and Melbourne: A common measure of housing affordability is the ratio of mean housing prices to mean household disposable
By Leith van Onselen ANZ has released new research examining the impact of foreign property purchases on the Australian housing market: The research shows foreign investors purchased between 35,000 and 60,000 dwellings in Australia in 2015-16, with foreign buyers making up only a small share of total housing turnover for the year, between 7 per
By Leith van Onselen The slow deflation of Sydney’s housing market has continued for the 13th consecutive week, with CoreLogic’s dwelling values index registering another 0.2% decline, with values down a cumulative 1.7% over that 13-week period, and dwelling values also down 1.4% over the past 18-weeks: Sydney’s quarterly growth rate continues to turn negative,
By Leith van Onselen In the week ended 7 December 2017, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, fell another 0.08%: Values fell in Sydney but rose in Melbourne and Adelaide, and were dead flat in Brisbane and Perth: So far in 2017, home values have risen
By Leith van Onselen Back in May, the Australian Taxation Office (ATO) noted that property investors were rorting the tax system by claiming excessive depreciation expenses on plant and equipment: “The ATO has actively monitored this area over many years. During this time we have identified a number of issues relating to inflated valuations of
Via AFR: McGrath has retrenched 15 employees in non-sales divisions including property management and IT. Chief executive Cameron Judson said the redundancies were in line with the recent ASX announcement indicating planned restructuring costs in non-revenue generating roles, outside the executive leadership team. I guess we can safely say that market conditions have not improved.
Yesterday the Chinese Embassy gave us a good old fashioned dummy spit: “Some Australian politicians and government officials also made irresponsible remarks to the detriment of political mutual trust between China and Australia. We categorically reject those allegations,” the Spokesperson of Chinese Embassy in Australia said. “Over the recent period, some Australian media have repeatedly
By Leith van Onselen With the Senate last month shooting down the Turnbull Government’s legislation to allow first-home buyers (FHBs) to use up to $30,000 of voluntary super contributions for a housing deposit, the rent-seekers over at the Housing Industry Association (HIA) have dialled-up the lobbying: “Superannuation incentives for first home buyers to save for their
Via the AFR: Real estate agents and developers are offering rental guarantees, even advertising on personal ad website Gumtree, in a bid to push sales in a slowing housing market. Last month, Melbourne developer Growland offered a 6 per cent yield guarantee for two years on new apartments purchases at their Victoria Square project in Footscray.
By Leith van Onselen From SQM Research comes stock on market figures for the month of November, which reported a seasonal 3.2% lift in total for sale listings over the month but a 3.7% decline over the year: Listings rose across all jurisdictions in November. Over the year, the decline in listings nationally was driven
APRA released its Sep QTR banking property exposures yesterday and we can update progress of the MP2.0. First, the progress towards 30% of mortgage stock being interest-only is good, falling to 35%: It was largely driven by mortgage flow as interest-only issuance tanked to just 17% of the total: When stock catches down to flow then
By Leith van Onselen Domainfax has published a boosterish report on the so-called ‘build-to-rent’ revolution coming to Australia: The number of homes built explicitly to rent out is set to take off in Australia over the next five years, housing industry experts have predicted. They’ll be nothing like we’ve seen before, either, with building managers
By Leith van Onselen As Australia’s dwelling values have surged against incomes: One of the casualties has been the huge housing deposits that must be saved by first home buyers (FHBs) in order to buy a home, according to a new report by BankWest, which concludes that it now takes 4.6 years for the average
Via the AFR: “The catch-22 for housing bubbles is that the flow of new mortgages is the main determinant of house prices, and for them to continue rising, the rate of growth of new mortgages has to keep rising,” academic economist Steve Keen said. “We now seem to be approaching the limit that households can bear,
By Leith van Onselen Last month, The AFR reported that first-home buyers (FHBs) are desperately fighting for land in Melbourne as the city’s population soars: First-home buyers face fierce competition in Victoria’s fast-rising market, with only a quarter of the 84 lots in Stockland’s latest land release going to first-time buyers. Shaneel Veerabathula was one
By Leith van Onselen In the wake of June’s Grenfell tower disaster in London, which claimed the lives of around 80 people, a special Victorian Taskforce interim report has identified 1,400 buildings with flammable cladding, including eight hospitals. From The ABC: The Victorian Cladding Taskforce identified 1,400 buildings “as most likely” having aluminium composite panels
CoreLogic released its auction report yesterday, which reported a small rebound in the preliminary national auction clearance rate to 63.5% from 66.9% last weekend, and remained well below the 72.3% recorded in the same weekend last year: Auction volumes nationally were 3,276 – slightly above the 3,207 recorded in the same weekend last year: As
Via the AFR: AMP Capital chief economist Shane Oliver said the final clearance figure for Sydney was likely to be around 54 per cent which would mean six weeks of clearance rates “in the fifties”. “[This] points to ongoing price weakness,” Dr Oliver said. He said auction clearance rates in the mid-fifties pointed to price
By Leith van Onselen Following my analysis of the Inner-Brisbane apartment market on Wednesday, several readers asked me to do a similar analysis on Inner-Melbourne, which is presented below. As shown in the below chart from CoreLogic, Melbourne is facing the second biggest uplift in apartment supply over the next two years, behind Brisbane: The
By Leith van Onselen The slow deflation of Sydney’s housing market has continued for the 12th consecutive week, with CoreLogic’s dwelling values index registering another 0.2% decline, with values down a cumulative 1.5% over that 12-week period, and dwelling values also down 1.4% over the past 17-weeks: Sydney’s quarterly growth rate continues to turn negative,
By Leith van Onselen Yesterday’s dwelling approvals data for August from the ABS reported a rebound in annual unit & apartment approvals after a prolonged period of falls: 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
By Leith van Onselen The Australian Bureau of Statistics (ABS) yesterday released dwelling approvals data for the month of October. At the national level, the number of dwelling approvals rose by a seasonally adjusted 0.9% to 19,074. The overall rise was driven by the detached house market (+1.5%), whereas apartment approvals fell by 0.6%. In
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; -0.2% QoQ; -0.9% YoY) is still in the gutter, whereas business credit growth (0.3%
Gottiboff panic! Can’t say I disagree at this point, though: The banking inquiry combined with regulator-driven clamps on lending will initially boost banking profits and margins but they will create a longer term threat to dwelling prices. But that’s just the start. When you put an industry like banking under extreme pressure surprising things happen.
By Leith van Onselen CoreLogic’s dwelling price results are in for November, with a 0.12% decrease in values recorded over the month at the 5-city level, driven entirely by a sharp decline in Sydney: Home values nationally are finally declining following the turbo-charged growth recorded over the 2016-17 financial year: Quarterly value growth is now