Via S&P: Australian prime home-loan arrears remained steady in June, with the Standard & Poor’s Performance Index (SPIN) for Australian prime mortgages slipping 1 basis point to 1.51% from a month earlier. That’s according to S&P Global Ratings’ “RMBS Arrears Statistics: Australia,” published today. Arrears typically decline in June and throughout the third quarter. Mortgage
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.
Last weekend, CoreLogic released its preliminary auction clearance rates, which revealed the following results: Today, CoreLogic released its final auction results, which reported a 2.6% decline in the final national auction clearance rate to 67.8% – well above the same weekend last year (54.9%) and also above last week’s 66.4%: As you can see, Sydney’s final
As we know, developer Ralan has collapsed owing creditors at least half a billion dollars. Included among them are hundreds of buyers who bought apartments off-the-plan who are facing deposit losses of up to $70,000 or more. Today, it has been revealed that Ralan targeted Chinese buyers in an elaborate ponzi scheme: Ralan, which was
It’s just not fair. Tiny houses are so cute. Adorable. Our kids should all be jammed into tiny houses so we can admire them there, like little marsupials with big, glowing eyes inside a shoe box. Then along came the dystopian council: With no specific legislation for tiny houses, some councils are treating them as buildings that
The developer smash continues with Devine reporting a first-half loss of $3.4 million, compared to a loss of $11.8 million that it posted for the first half of 2018. Revenue for the half came in at $15.1 million, compared to revenue of $24.3 million for the first half of 2018. Devine settled 133 land allotments
As stalled developments hulk across Australia’s east coast amid the surge in completions: The AFR reports that desperate developers are offering incentives of up to $90,000 in order to clear their apartment backlog: Commission payments of between $30,000 and $90,000 – plus extra incentives for multiple sales – are being offered by developers to buyers’
SQM Research has released its rental vacancy series for July, which revealed a small rise in the national vacancy rate to 2.3% from 2.2% last month; although it was steady over the year: Over the year, increases in vacancies were recorded in Sydney (+0.7%), Melbourne (+0.4%) and Canberra (+0.3%), whereas they fell in Brisbane (-0.5%),
The growing “tiny home” movement must be one of the greatest marketing cons pulled off in recent years. With home ownership on the decline across much of the developed world, and homelessness rising, policy makers and the media have managed to convince the general public into believing that stuffing people into glorified caravans and trailer
Via Martin North: The key question now is will the banks revert to their previous practices of doing little to validate household spending patterns as part of the mortgage assessment processes. Some are already saying “buy now” with renewed vigour. The Royal Commission revealed last year that some lenders ignored household expense data favouring the
Via the ABC: The Federal Court has dismissed ASIC’s responsible lending case against Westpac and ordered the regulator to pay the bank’s costs. ASIC had alleged that Westpac breached responsible lending laws on up to 262,000 home loan approvals made using an automated process that relied on the Household Expenditure Measure benchmark, rather than using
Yesterday was the first day of the inquiry into NSW building standards, which was set up last month after major faults appeared in apartment buildings such as Mascot Towers and Opal Tower. The inquiry heard tails of woe from owners of apartments in the Mascot Tower, who have been left destitute and facing potential bankruptcy.
CoreLogic’s August chart pack shows that the premium end of the market suffered the biggest declines in the year to July, but have also led the recovery over recent months: To add more colour, below is CoreLogic data examining price growth across the three broad market segments – bottom 25%, middle 50% and top 25%.
It’s all so predictable. Just months out from the prolific criminality exposed by the Hayne Royal Commission, the rentiers are back. Via the AFR: The founder of Aussie Home Loans, John Symond, says the housing market has turned a corner but both he and ANZ Banking chief Shayne Elliott believe that ‘over-regulation’ could threaten its
In the video above, Martin North and property insider Edwin Almeida delve deeper into the high-rise apartment crisis, which they have previously claimed is a $1 trillion problem for Australia. In particular, North and Almeida discuss the collapse of developer Ralan and what the implications are for home buyers of off-the-plan buyers. Two months ago, Edwin Almeida
Some brouhaha around this in Denmark: Jyske Realkredit is ready with a fixed-rate mortgage with a nominal interest rate of minus 0.5%. Yes, you read right. You can now get a fixed-rate mortgage with a maturity of up to 10 years, where the nominal interest rate is negative. However, you are not exactly going to make money
In Friday’s testimony to the House of Representatives Standing Committee on Economics, Reserve Bank of Australia (RBA) governor, Phil Lowe, explicitly blamed mass immigration for fuelling the strong house price inflation experienced over the past decade: Chair: Since its peak in 2011, the cash rate has fallen from 4¾ per cent to 1½ per cent…
Could it be that hubris has overcome the ScoMo Government already? Via the AFR: The briefing, for MPs who entered Parliament in 2016 and 2019, was held when Parliament sat the week before last and was organised by Liberal MPs Tim Wilson, Jason Falinski and Andrew Bragg. It was designed to inform MPs from the
Auction clearance rates continue to strengthen, with the preliminary rate nationally rising above 70% and Sydney’s rising above 80%: As shown below, the preliminary national auction clearance rate rose to 70.4% versus 68.3% last weekend. Clearances were also way above the 54.9% recorded in the same weekend last year: Sydney’s preliminary clearance rate rose to
Hey, hey, Millennials, this is for you: Tiny homes are popular with millennials since their standard of living has collapsed. All thanks to insurmountable student loans, no savings, and gig-economy jobs that don’t pay the bills. Wzhgroup, a Chinese builder of container homes, has recently become a merchant on Amazon where they can ship a tiny, expandable container
Susan Lloyd-Hurwitz, the CEO of Australia’s largest apartment developer Mirvac, has demanded an urgent lift in building standards, labelling the crisis in defective units as “outrageous” and a “breach of faith”. From The SMH: “Of particular urgency currently is the need to raise building standards in Australia,” she said. Ms Lloyd-Hurwitz said it was “unacceptable”
Below are the latest charts, derived from CoreLogic data, plotting annual sales volumes across Australia’s capital cities to April 2019: Sydney (-46%), Melbourne (-38%), Brisbane (-30%), and Perth (-37%) are all down massively from their most recent peaks, whereas across the combined capitals sales are down 34%. In fact, the last time annual sales volumes
She’s probably Australia worst public policy sell out. And she’s earning her $600k plus, via Banking Day: The Australian Banking Association is preparing to push back against ASIC’s plan to make responsible lending guidelines more prescriptive, and will argue for the maintenance of the principles-based approach when the regulator holds public hearings on the issue
In the week ended 8 August 2019, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, retraced by 0.05%: It was the first decline in four weeks. The fall in values was broad-based, with all major markets falling: The quarterly decline is running at 0.30%, with Melbourne and Sydney
Last weekend, CoreLogic released its preliminary auction clearance rates, which revealed the following results: Today, CoreLogic released its final auction results, which reported a 1.9% decline in the final national auction clearance rate to 66.4% – well above the same weekend last year (54.0%) but below last week’s 68.6%: As you can see, Sydney’s final auction