A survey produced by EY and the Urban Land Institute forecasts that the COVID-19 pandemic will have a significant impact on global demand for office space over the next 3-5 years. Many tenants will require less office space in coming years as they adopt more flexible working arrangements, while many are expected to seek more
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.
RMIT’s Centre for Urban Research has released a new report showing that two-thirds of Australian urban areas have lost tree cover over seven years due to development: That’s one of the conclusions of a new report that has also found that in just seven years the number of trees in 69 per cent of urban
Victim witnesses of the Hayne banking royal commission and consumer groups have united to oppose the Morrison Government’s announced axing of responsible lending laws: The Consumer Action Law Centre, which helped many commission witnesses through the gruelling process, says changing responsible lending laws could lead to trouble. “The Treasurer’s proposals are a real slap in
CommSec has released its annual Home Size Trends Report, which claims that Australia’s houses are now the world’s largest: Australia is again building the biggest houses in the world. Data commissioned by CommSec from the Australian Bureau of Statistics, shows the average new house built in 2019/20 was 235.8 square metres, up 2.9 per cent
Via PEXA: PEXA uses a simple median which does not adjust for composition (such as more sales at the bottom end versus top) or other variables such as changes in quality like renovations etc like CoreLogic does: So, CoreLogic’s Melbourne’s at -6% and Sydney’s at -3% are not necessarily out of step with larger falls
CoreLogic’s preliminary auction clearance rate softened this weekend, with 73.2% of reported auctions cleared versus 77.0% last weekend: Sydney’s preliminary clearance rate remained strong with 78.6% of reported auctions cleared versus 79.6% last weekend. Melbourne’s preliminary auction clearance rate softened to 71.8% versus 75.8% last weekend. According to CoreLogic: There were 1,758 homes taken to
CoreLogic’s head of research, Eliza Owen, has published the below interesting research questioning the notion that COVID-19 has spured a regional housing boom: There has been a high level of interest as to whether the pandemic has spurred housing demand in regional markets of Australia. Housing market data is partially suggestive of this, especially across
Fixed-rate loans dominate the UK mortgage market, accounting for around 90% of home loans. By comparison, 70% to 90% of property borrowers in Australia opt for variable interest rates. However, National Australia Bank CEO Ross McEwan believes that the trend toward fixed-rate loans will continue to gather pace and they may soon account for about
In the week ended 5 November 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, rose another 0.04%: It was the third consecutive weekly rise. All major markets but Melbourne recorded value rises: Quarterly value declines are slowing fast with rises across the smaller capitals more than offset
CBD office occupancy rates are slowly rising back toward pre-COVID norms as restrictions ease and workers return: The rates are compiled by the Property Council of Australia based on responses from 102 office landlords, who collectively own or manage the majority of central business district office buildings. “The shift is on and more CBD workers
CoreLogic has released its final auction clearance results for last weekend, which reveals that the final national clearance rate surged to 71.0% from 66.9% the prior week: Sydney’s auction clearance strengthened to 73.1% from 70.4% the prior week, whereas Melbourne’s rose to 70.1% from 63.52%. As noted by CoreLogic: Last week, the combined capital city
Prior to this week’s 0.15% cut to the RBA’s cash rate to a record low 0.10%, the gap between average discount variable mortgage rates and the 3-year fixed mortgage rate had already ballooned to 1.26%: As shown above, the average discount variable mortgage rate was 3.65% in October versus a 3-year fixed mortgage rate of
Yes, our pollies have come together to tackle the crucial issue of our time, at The Converastion: While Australians were distracted last week by Melbourne’s lockdown ending and the final days of the Queensland and United States elections, both major parties joined forces in federal parliament to weaken political donations laws. This will make it easier for federal
With last week’s release of population growth data for the September quarter, it is once again time to examine how Australia’s dwelling supply is tracking against population growth, as projected in the 2020 federal budget. The below charts track the above population projections against the latest available quarterly dwelling construction data, specifically: Dwelling approvals to
Via Martin North: The results from our latest household surveys reveals that despite the return to work as the lock down is eased, the reduction in JobSeeker, JobKeeper and the need to renew mortgage payments are all offsetting the better job news, in a low income growth, high cost environment. We also updated our property
With repayments on $133 billion worth of mortgages from 325,000 borrowers still deferred, according to APRA, Australia’s largest bank – CBA – has extended a moratorium on forced sales until September 2021: In an email between CBA and Financial Counselling Australia (FCA) obtained by News Corp, the bank confirmed customers still impacted by the health
Mortgages are going nuts! All I can say is: who cares. Why would I say that after years of fighting the bubble? A few reasons. First, this is an owner-occupier boom. What has so incensed me about previous booms is that they’ve been manifestly unfair driven at various stages by rent-seeking investors, Chinese blood-money or
SQM Research has released its stock on market data for October, which revealed that for sale listings nationally rose by 6.5% in October driven by a whopping 26.7% surge in Melbourne as the city eased restrictions on home auctions and inspections: Over the year to October, listings declined by 3.3% nationally despite strong rises across
Yesterday’s Lending Indicators data for September from the ABS revealed that Aussie households continue to shun consumer borrowings, with personal finance commitments falling to their lowest level on record: As shown above, annual new personal finance commitments fell by 13% year-on-year and were 41% below the long-term average. This followed Friday’s private credit data from
Via UBS: Sep residential approvals rebound much stronger than expected 15.4% to 190k Residential building approvals were far stronger than expected in September, up 15.4% m/m (UBS: 0.0%, mkt: 1.5%, pre: -2.3%), to 190k annualised (after 165k), the highest level since February, and one of the highest since the 2018 boom. The y/y picked up
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
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