CoreLogic has released its first preliminary auction report for the year, which rocketed above 80% over the weekend: As shown in the table below, the boom in clearance rates was driven by Sydney and Melbourne: According to CoreLogic: Capital city auction activity ramps up after the seasonal slowdown, with 891 homes taken to auction this
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 daily index results, which reveals that dwelling values across the five major capitals rose by 0.62% in January – the fourth consecutive monthly increase: Dwelling values rose across all five major capitals, with Perth (+1.55%), Brisbane (+0.98%) and Adelaide (+0.88%) leading the way and Sydney and Melbourne (each 0.43%) lagging: Over
The RBA has released its private sector credit aggregates data for the month of December, which revealed a rebound in mortgage growth: A chart plotting the long-run time series is shown below: Overall mortgage growth was 3.5% in the year to December, rebounding from the all-time low 3.0%. A breakdown of owner-occupied credit (0.6% MoM;
Treasurer Josh Frydenberg says the continued decline in loan deferrals shows that the Australian economy is recovering from the COVID-19 pandemic. New Australian Prudential Regulation Authority (APRA) data shows that the total value of deferred home loans fell by $7 billion in December, to just $43 billion. This compares to a peak of $192 billion
In the week ended 28 January 2021, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, rose another 0.24%: It was the 15th straight weekly rise. All major markets recorded value rises: So far in January, dwelling values have risen by 0.50%, with the three smaller capitals recording strong
Domain has released its median property results for the December quarter, which shows that Australian house prices have hit a record high: National house prices leapt to new record highs at the end of 2020… With the median house price in Sydney now at an all-time peak of $1,211,488, Melbourne’s at $936,073 and Canberra’s at
Amid the collapse in international tourism, Meriton’s Harry Triguboff has made the “painful” decision to convert several short-term holiday apartment towers into long-term rentals: In a major blow to the tourism accommodation sector real estate mogul Harry Triguboff has taken the difficult decision to convert up to five proposed serviced apartment towers planned for the
The Australian Bureau of Statistics (ABS) yesterday released consumer price index (CPI) data for the December quarter, which revealed that property rents fell sharply in 2020. While property rents rose by 0.1% of the quarter: Over the 2020 calendar year, rents fell by 1.3%: The next chart plots rental growth across the capital cities: As
CoreLogic has released its Quarterly Rental Review, which shows house rents booming but apartment rents busting: Overview National rental rates rose by 0.6% over the month of December, taking national rents 1.9% higher over 2020 calendar year; the largest annual increase since 2018. Rental conditions in 2020 were diverse with regional markets outperforming capital cities.
As we know, the Morrison Government is seeking to abolish responsible lending rules, in contravention of the Hayne Banking Royal Commission, which recommended these rules remain in place: Under the consumer credit amendment bill, which was introduced in December, responsible lending obligations will essentially be removed from the national consumer credit rules, with the only
Vica CoreLogic leading indexes. Mortgages are rebounding from moderate seasonal falls: The supply side is tightening everywhere except the Melbourne ghost city: That’s what happens when you base your entire economy on the population ponzi. As we’ve been saying for some time, property prices up. Melbourne and Sydney to lag materially. Full report.
After experiencing 20%-plus declines in values and rents in the six years from 2014, Perth’s property market is experiencing booming conditions not seen since the mid-2000s mining boom: REIWA statistics showed during the December quarter the average time it took for a Perth house to sell was nearly halved to 21 days, compared to 38
Last week the ABS released its construction activity report for the September quarter of 2020, which provided data on dwelling commencements and completions. Below are charts plotting population growth against dwelling construction across Australia and the five major jurisdictions. Below is the national picture: Next are charts for the five major states: The above charts
CoreLogic’s head of research, Eliza Owen, has published a new report looking at Australia’s regional property markets, which are currently experiencing booming conditions: There has been no shortage of reporting about the relatively strong performance of regional Australian dwelling markets over 2020. December home value data showed the combined regional dwelling market increased 6.9% in
CoreLogic has released its Q4 Auction Report, which shows the market booming as 2020 drew to an end: CoreLogic’s Auction Market Review for the December quarter 2020 saw the combined capital city clearance rate continue to strengthen, while auction volumes increased by 44 per cent over the same period. The combined capital city clearance rate
Last year, NSW Planning Minister, Rob Stokes, used COVID as an excuse to turbo-charge development: NSW planning processes and development applications will be fast-tracked in a bid to support the construction sector and maintain jobs during the COVID-19 pandemic. Assessments of state significant developments, rezoning and development applications will be accelerated under the changes announced
Via the AFR: So should Reserve Bank boss Philip Lowe be getting ready to stage an intervention to thwart an imminent surge in house prices. …Dr Lowe will have had a close look at the Reserve Bank’s own confidential research that argues that house values could jump 30 per cent over three years if near-zero
In the week ended 21 January 2021, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, rose another 0.15%: It was the 14th straight weekly rise. All major markets recorded value rises: So far in January, dwelling values have risen by 0.26%, with the three smaller capitals recording strong
In yesterday’s article entitled “Why housing construction will crash in 2022”, I warned that the property lobby would intensely lobby the federal government to restore mass immigration: “…expect to see intense lobbying from property groups calling on the federal government to provide more subsidies, as well as to open Australia to migrants. Without a return
Some economists believe that fixed mortgage rates in Australia might have hit their bottom: The Reserve Bank Of Australia has been buying up government bonds to maintain record-low interest rates. According to the National Australia Bank, the RBA will own nearly all April 2024 bonds by the middle of this year. Economists say this will
New Treasury data shows that the federal government received 75,143 applications for the HomeBuilder grant during the first phase of the scheme, including more than 35,000 during the last three weeks of 2020. The Treasury had forecast in June that it would receive just 27,000 applications for the grants by 31 December. The unexpected surge
Consumer groups have hardened in their opposition to the Morrison Government’s plans to abolish responsible lending laws, which were introduced in 2009. The Financial Rights Legal Centre has urged Senate crossbenchers to vote against any such move, while Financial Counselling Australia and CHOICE warn that scrapping the responsible lending regime would make it easier for
Once he ran a non-bank lender. Now he’s singing a different tune, at the AFR: Nicholas Gruen, Lateral Economics chief executive and a former adviser to Labor treasurer John Dawkins, said the RBA was “pushing on a string” with near-zero interest rates and the fiscal policy of governments had rightly picked up some of the
From the Housing Industry Association (HIA): “New Home Sales reached remarkable heights in December, nearly doubling compared to the number of sales recorded in November,” stated HIA’s Economist, Angela Lillicrap. The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – is a leading
The housing affordability situation in New Zealand has gone from bad to worse, with new data released by the RBNZ showing that the value of New Zealand’s housing stock hit $1.28 trillion in the September 2020 quarter, up 10.7% year on year. When compared against the size of the economy – currently $321 billion –
Domain’s December quarter Rental Report has been released, which reveals that apartment (unit) rents have fallen off a cliff across Sydney and Melbourne, driven by collapsing demand from international students and migrants alongside ballooning supply: In Sydney, apartment rents have plummeted to 2013 levels whereas they have fallen to 2016 levels in Melbourne: Sydney Unit
According to The AFR, “borrowing for housing construction is 75 per cent higher than July, after the federal government introduced the HomeBuilder grants in response to COVID-19 and other home building grants offered by state governments”: Finance approvals for housing construction reached new highs, which Goldman Sachs economist Andrew Boak said “bodes well for the
Freedom of Information (FOI) documents released on Friday by the Reserve Bank of Australia (RBA) reveals that it saw risks in its decision to cut the cash rate to 0.10%, alongside introducing the Term Funding Facility (TFF) for banks and buying government bonds. In particular, the RBA noted that “a permanent (temporary) 100 basis point