The Australian Bureau of Statistics (ABS) yesterday released its dwelling approvals data for September, which revealed that apartment approvals have fallen 59% below their November 2017 peak: Today, I want to focus on the high-rise apartment segment, which has driven the apartment bust. The next chart shows the picture at the national level and across
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.
Yesterday’s mortgage finance data from the Australian Bureau of Statistics (ABS) was unambiguously strong, driven by owner-occupiers: Total new mortgage commitments (excluding refinancings) rose by 25.5% year-on-year in September, driven by a whopping 33.8% growth in owner-occupier mortgage commitments versus 4.2% growth in investor commitments. As regular readers know, mortgage growth is one of the
CoreLogic has released data showing that apartment rents across Melbourne and Sydney have now tanked by 6.6% and 5.8% respectively over the seven months to 31 October: This follows a sharp rise in Sydney (3.5%) and Melbourne (3.8%) rental vacancy rates: While detached house rental listings in Sydney are fairly tight (7,848), there was a
Global Macro / Markets / Investing: On the Minimum Wage – Medium The future of fiscal policy without traditional constraints – FT U.S. Dollar: There’s Possibility Of A Crash – Seeking Alpha The 4th industrial revolution, the Great Reset and Covid-19 – Medium Rashida Tlaib and AOC have a proposal for a fairer, greener financial
Former Liberal leader John Hewson has slammed the Morrison Government’s proposed scrapping of responsible lending laws claiming it could create a “debt monster” that would be detrimental to the economy over the longer-term: “I think the basic premise is wrong,” Dr Hewson told The New Daily. “Lending might stimulate some short-term spending, but in the
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 surged by a seasonally adjusted 15.4% to 15,827. The overall rise in approvals was driven by the volatile units & apartments segment (+23.4%), whereas house approvals rose by 9.7%. Over
The Australian Bureau of Statistics (ABS) has released housing finance data for September which revealed another strong lift, driven by both owner-occupiers and investors: The below chart plots the time series: Total new mortgage commitments (excluding refinancings) surged by 5.9% in September, with owner-occupied mortgages rising 6.0% and investor mortgages rising 5.2%. Year-on-year, total new
The Australian Prudential Regulatory Authority (APRA) on Friday updated its loan deferrals data to September 2020, which revealed that there were still $179 billion loans outstanding as at 30 September, accounting for 6.7% of total loans outstanding by value: The volume of deferred mortgages was $133 billion in September, accounting for 7.4% of total
CoreLogic’s dwelling value results for September are out at the 5-city level, with values falling another 0.27% over the month, driven purely by Melbourne and Sydney: As shown above, all major markets other than Melbourne rose in value in October. It was the first monthly rise in six months at the 5-city level: Over the
CoreLogic’s preliminary auction clearance rate strengthened again, with 77.0% of reported auctions cleared versus 76.2% last weekend: Sydney’s preliminary clearance rate rose was strong with 79.6% of reported auctions cleared versus 80.4% last weekend. Melbourne’s preliminary auction clearance rate firmed to 75.8% versus 72.6% last weekend. According to CoreLogic: There were 1,757 homes take to
CoreLogic has released its final auction clearance results for last weekend, which reveals that the final national clearance rate firmed to 66.9% from 66.2% the prior week: Sydney’s auction clearance strengthened to 70.4% from 69.1% the prior week, whereas Melbourne’s rose to 63.5% from 60.2%. As noted by CoreLogic: There were 1,427 auctions held across
The RBA has released its private sector credit aggregates data for the month of September, which revealed a rebound in mortgage growth: A chart plotting the long-run time series is shown below: Overall mortgage growth was 3.3% in the year to September, rebounding from the all-time low 3.0%. A breakdown of owner-occupied credit (0.5%
APRA monthly investor mortgages are out for September and there isn’t much joy here for house prices. The ANZ tearaway cratered, CBA is firm but the other two majors are retrenching for net result of zero growth: Year on year is falling steadily For a “community bank” Bendigo sure looks like a credit cavalier. Still,
Eliza Owen, Head of Research Australia at CoreLogic, has released an interesting report examining property returns during Australia’s 20 years of low inflation: The latest CPI results from the ABS showed a 1.6% increase in the consumer price index over the September quarter. The increase was the highest quarterly result since 2006, and adjusting for
As readers know, Sydney (3.5%) and Melbourne (3.8%) are currently experiencing high rental vacancy rates: SQM Research has updated its new weekly rental listings data, which shows the dramatic lift in apartment listings across both Sydney and Melbourne. You can see from the next chart that detached house rental listings in Sydney are fairly tight
In the week ended 29 October 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.09%: It was the second consecutive weekly rise. All major markets but Sydney recorded value rises: So far in October, Dwelling values have risen 0.17% at the 5-city level, with all
The Australian Bureau of Statistics (ABS) yesterday released data showing that capital city residential property rents fell another 0.2% over the September quarter, which follows the 1.3% decline recorded in the June quarter: Over the year, Australian capital city rents fell by a record 1.4%: The below charts plot residential rental growth across the various
Last month we were left flabbergasted when, out of nowhere, Treasurer Josh Frydenberg announced that the government would axe responsible lending rules: If you want proof that Australia’s economic managers are really just bubble managers, here is your smoking gun. This is a watershed moment in Australian banking and property history. Consumer groups promptly slammed
According to CBA’s internal data, Australian mortgage lending strengthened further in September, up 30% year-on-year: However, average loan sizes are shrinking; albeit are still higher year-over-year: The share of fixed rate lending remained at high levels, driven by fixed rates being lower than variable rates: Lending for renovations continued to grow, likely driven by people
Under the cover of COVID and the AFL Grand Final, the Victorian Government fast tracked a swathe of developments to spur its sagging property ponzi economy: Planning Minister Richard Wynne has fast-tracked $625 million worth of developments… Announcing the approvals on AFL grand final day, Mr Wynne said the government had now approved $7.5 billion
Earlier this month, The AFR reported that commercial vacancy rates were swelling across Australia’s CBDs: Office vacancy rates in the Sydney and Melbourne CBDs are more than double what they were a year ago, raising the prospect that some towers could drop in value by as much as 15 per cent as rents also fall.
So says Moody’s: Australian housing affordability, which improved over the year to September, will continue to improve slightly over the next 12 months, because of low mortgage interest rates and lower housing prices. » Affordability will continue to improve on low mortgage rates and lower housing prices. Australian households with two income earners needed 23.0%
CoreLogic’s preliminary auction clearance rate strengthened, with 76.2% of reported auctions cleared versus 72.4% last weekend: Sydney’s preliminary clearance rate rose was strong with 80.4% of reported auctions cleared versus 75.9% last weekend. Melbourne’s preliminary auction clearance rate also firmed to 72.6% versus 65.0% last weekend. According to CoreLogic: There were 1,456 capital city homes
Robert Gottliebsen has urged the federal government to allow first home buyers (FHBs) to raid their superannuation nest eggs for the purposes of purchasing a home: For young people, let’s revisit the idea that, on a restricted basis, some of their superannuation could be used to help them own a home. Owning a dwelling to
ABC News has provided a useful update on the rental smash taking place in Sydney and Melbourne: …the latest rental vacancy data from SQM Research shows the pandemic is taking a harsher toll here than other capital cities. The vacancy rate (the percentage of available properties not yet leased) has almost doubled in the 12
From Eliza Owen, Head of Research Australia at CoreLogic: One of the lessons learned about the property market through COVID-19 is that listings numbers have been extremely responsive to changes in social distancing policies. Despite an extended lockdown, Melbourne is no exception. Since onsite, private inspections resumed on the 28th of September, new listings volumes
In the week ended 22 October 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, jumped by 0.13%: It was the first rise in 24 weeks. All major markets recorded value rises: So far in October, Dwelling values have risen 0.09% at the 5-city level, with all capitals
CoreLogic has released its final auction clearance results for last weekend, which reveals that the final national clearance rate retraced to 66.2% from 66.4% the prior week: Sydney’s auction clearance strengthened to 69.1% from 67.2% the prior week, whereas Melbourne’s rose to 60.2% from 58.6%. As noted by CoreLogic: There were 1,131 capital city homes
The CEO of AUSTRAC – the Australian Government agency responsible for detecting, deterring and disrupting criminal abuse of the financial system – has warned that lawyers, accountants and real estate agents are being used to launder illicit, necessitating then need for the industry participants to be brought into the anti-money laundering (AML) regulatory net: Austrac
A group of university academics have called on the Morrison Government to significantly increase housing stimulus in order to help drive Australia’s economic recovery: In response to the COVID-19 recession, federal, state and territory governments quickly provided support to the housing industry for two reasons. First, to safeguard jobs and, second, because investment in the