Via the rentier headquarters at the AFR comes Kevin Davis, Professor of Ponzi-Finance at The University of Melbourne: “For sale by mortgagee” signs sprouting around the country is not something anyone wants to see happening. But there is a risk of that – and home owners being evicted on to the streets – once the
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.
AMP chief economist Shane Oliver believes the ‘golden years’ of property investment are over, and that a much darker future faces Australia’s army of negatively geared landlords: “The chronic lack of supply relative to very strong demand for housing over the last 15 years, at a time of high levels of immigration, has paid off
Amusing stuff, via the ABC: Top brass at Australia’s central bank have hit back at ABC reporting that exposed how the dire view of the housing market held by some Reserve Bank staff clashed with the rosy picture the bank’s representatives presented in public. Staff then sought “receptive” journalists to tell their side of the
CoreLogic’s preliminary auction clearance rate remained fairly steady, with 64.7% of reported auctions cleared versus 64.3% last weekend: However, Melbourne’s preliminary clearance rate slumped to 50.3% from 63.6% last weekend off thin volumes. By contrast, Sydney’s preliminary clearance rate rose to 71.9% from 67.8% last weekend. As noted by CoreLogic: The performance across the two
Two months ago, ASIC narrowly lost its responsible lending case against Westpac in the Federal Court. ASIC’s case against Westpac went all the way back to 2017, when it commenced proceedings alleging that between 2011 and 2015 Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.
Recent Twitter exchanges have helped me to understand a couple of additional confusions in the housing supply debates following my recent podcast with Ian Mulheirn. Let me take them one at a time. The housing supply mechanism This Twitter statement contains some hidden assumptions and two main points; 1) that land is worth different market value
It’s Friday funny time, with the REIV’s final auction clearance rate coming in hot once again, at a rip roaring 89% : The final auction results for week ending 16 August 2020 from 88 per cent results collected by the REIV. For the latest updates, visit REIV Market Insights. https://t.co/6pIlgiUMMD#melbre #auction #realestate #reiv #reivmarketinsights pic.twitter.com/0xrTIUp5d5
In the week ended 20 August 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, fell another 0.11%: It was the 15th consecutive weekly decline. The fall was again driven by Melbourne: Quarterly dwelling values continue to fall fast, also led by Melbourne: Annual price growth remains solid
Master Builders Chief Executive Denita Wawn is pushing to allow first home buyers (FHB) early access to up to $50,000 of their superannuation funds to build or purchase their first homes, alongside a $5 billion construction stimulus in the October budget: Ms Wawn said Mr Frydenberg should allow compulsory super to be used “to help
The Housing Industry Association (HIA) has released a dire forecast for dwelling commencement. According to the HIA, dwelling commencements are forecast to slump to a 13-year low of 133,010 by June 2022, down a whopping 58% from the June 2018 peak: As usual, the HIA has called for a big ramp-up in immigration to backfill
So-called property ‘experts’ are once again warning of a dire shortage of housing across Sydney: Development approvals for new housing this year sank to their lowest level in close to a decade, with building levels nearly one fifth long-term trend in some areas, analysis of ABS data showed… Consultancy group AreaSearch’s director and former head
Westpac yesterday released its third quarter results, with the company announcing that it would not pay a dividend due to “significant uncertainty” and “increased provisions for bad debts” as “many mortgage and business customers continue to require assistance”. Included in its disclosures is the below slide showing that 78,000 customers had deferred $30 billion worth
Cross-posted from The Conversation Real home prices across Australia have climbed 150% since 2000, while real wages have climbed by less than a third. Sydney and Melbourne rank among the most expensive cities in the world. Australia-wide, home ownership levels have fallen from 70% to 65% in the last 20 years and home equity levels have fallen from 80%
Reserve Bank governor Philip Lowe suggested on 14 August that responsible lending restrictions implemented in the wake of the banking royal commission are impacting on credit growth. Lowe’s comments before federal parliament’s Standing Committee on Economics have been used as ammunition by the the Housing Industry Association (HIA) to argue for eased restrictions on mortgage
Highrise Harry with his usual rent-seeking: “The future is very grim. We cannot survive without people — the migrants — coming to this country,” Triguboff says. “It is rubbish. We have never had these types of problems before. “The other problem will be unemployment. It will be very hard for people. So we have to
There will be no Spring bounce for property on the latest CoreLogic leading mortgage index: The index is materially below comparable 2019 and 2018 levels and crashed from 2017. Recall, too, that this index is owner-occupier only. Investor mortgages are much weaker to boot. There may be some downside price support from weak listings: But
CoreLogic’s head of research, Eliza Owen, has produced interesting research on the massive surge of rental listings across Australia’s inner-city markets: The increase in rental listings represents the change in the level of total rental stock counted in the 28 days leading up to the 15th of March, the week in which Australia recorded its
Via The Guardian: Fewer than 250 people have applied for the Morrison government’s homebuilder scheme, officials have revealed, despite the hype from an industry association that it was the “most effective stimulus in decades”. The federal government announced the $688m scheme just over two months ago, offering homeowners up to $25,000 to either build a new home or
NABs third quarter results were released on Friday, which revealed that 86,000 mortgages have been deferred totalling some $35 billion: According to NAB: 7.4% of people have an LVR over 80% of which 4.5% don’t have LMI. 2.6% of people have an LVR over 90% of which 1.5% don’t have LMI. Compared with the total
CoreLogic’s preliminary auction clearance rate remained fairly steady, with 64.3% of reported auctions cleared versus 65.9% last weekend: Melbourne’s preliminary clearance rate fell to 63.6% from 73.0% last weekend off thinning volumes. By contrast, Sydney’s preliminary clearance rate rose to 67.8% from 65.8% last weekend. As noted by CoreLogic: This time last year, the combined
The latest Australian Prudential Regulatory Authority (APRA) data on mortgage repayment deferrals revealed that $195 billion of mortgages have been deferred by around 500,000 Australian households, accounting for 11% of total outstanding mortgage debt: Moreover, around one-third of investor mortgages have been deferred, according to APRA: With the September deadline on the resumption of mortgage
So says the spruikers at the REIV: The final auction results for week ending 9 August 2020 from 89 per cent results collected by the REIV. For the latest updates, visit REIV Market Insights. https://t.co/6pIlgiUMMD#melbre #auction #realestate #reiv #reivmarketinsights pic.twitter.com/4gT3p50gXR — REIV (@REIVictoria) August 12, 2020 Not so says CoreLogic, whose final auction clearance report
In the week ended 13 August 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, fell another 0.20%: It was the 14th consecutive weekly decline. Falls were recorded across all major markets: Quarterly dwelling values are falling fast, led by Melbourne: Annual price growth remains strong but continues
By Jesse Hermans, Policy Director at Prosper Australia, an NGO focussed on tax reform. The Thodey Review’s draft report is right to place land tax at the centre of its vision for state tax reform. Replacing stamp duty with what the Review called “the states’ best tax lever” has the potential, if enacted sensibly, to
Data has been released on the Morrison Government’s first home buyer (FHB) deposit subsidy scheme, which reveals that more than half of all spots have filled in the second tranche, which opened in July: About 4500 spots are pending and more than 1000 application certificates have already been approved… Minister for Housing and Assistant Treasurer
The Morrison Government’s HomeBuilder policy has hit the right note with Housing Industry Association (HIA), driving up new home sales: “With two months of data since the introduction of the Australian Government’s HomeBuilder scheme it is increasingly clear that HomeBuilder has arrested the decline in New Home Sales and will protect jobs in the sector
Shane Oliver – chief economist at AMP Capital – believes that significantly lower immigration arising from the COVID-19 pandemic will weigh on Australia’s property market for years and could ultimately solve Australia’s chronic housing affordability problem: The coronavirus shock… has brought lots of pain and suffering on a human level but also on an economic
Chris Rands from Nikko Asset Management has penned a terrific report explaining why Australia’s property market is headed for price falls of up to 20%. Below are key extracts: The current housing figures have been remarkably resilient given the circumstances… When determining a short-term outlook for house prices, three key indicators prove particularly useful: auction