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.
With both Sydney and Melbourne in hard lockdown this weekend, I was expecting the nation’s auction clearance rate to take a heavy hit. Not so, with CoreLogic recording a preliminary national clearance rate of 76.3%, basically the same as last weekend’s 76.4%. Sydney’s preliminary clearance rate firmed to 77.1% from the prior weekend’s 76.5%, whereas
Australian property market prices continued to climb over the last month, with the past six months seeing some of the strongest growth on record. Mortgage interest rates edged higher as the Reserve Bank of Australia ended its Term Funding Facility. There are some extraordinary divergences in affordability. It has never been cheaper in some markets
The auction market has largely swept aside Sydney’s lockdown, with the final national clearance rate rising to 73.7% from 72.1% the prior weekend off similar volumes (2,104 versus 2,168 the prior weekend). As shown in the next table, Sydney’s final clearance rate rose to 74.3% from 70.5% the prior weekend. This was off 650 auctions
In the week ended 15 July, the CoreLogic daily dwelling values index increased another 0.35% – the smallest weekly increase since early April: All major markets except Perth record rising values: So far in July, dwelling values have risen by 0.85%, led by Sydney and Brisbane: Quarterly price growth remains turbo-charged at 6.19% across the
Yesterday, the Australian Bureau of Statistics (ABS) released dwelling construction data for the March quarter, which showed that detached house commencements hit the highest level on record over the quarter, whereas unit commencements fell to a nine-year low: By contrast, actual dwelling completions remained depressed over the quarter, suggesting the pipeline of construction is well
CoreLogic has released a new report showing that it is cheaper to service a mortgage than rent across one-third of the nation’s properties, with New South Wales and Victoria primarily responsible for warping the results: CoreLogic analysis suggests servicing a mortgage is now cheaper than paying rent on 36.2% of Australian properties, which is higher
May’s Victorian Budget implemented a new windfall gains tax for properties whose value is boosted by a council rezoning. This tax will apply to properties where the value is boosted by more than $100,000, with a 50% tax on windfalls above $500,000. The clearest indication that this windfall tax is good policy has come from
That’s the message from today’s Westpac consumer sentiment release: • The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 1.5% to 108.8 in July from 107.2 in June. The survey was conducted over the week of July 5–9, during the lock-down in Sydney and restrictions in regional NSW but before the tightening of restrictions announced
SQM Research has released its June rental report, which recorded the lowest national rental vacancy rate since May 2011 at just 1.7%: The next chart plots the time series at the national level and shows clearly the sharp reduction in the vacancy rate over the past year: And here is the time series across the
The end of the Morrison Government’s HomeBuilder grant on 14 April 2021 has failed to dampen new home sales, which “jumped 15.3 per cent to be 11.2 per cent higher in the quarter than the same time in 2019”, according to HIA Economist Angela Lillicrap: “The strength of new home sales nationally suggests that there
Below is the first in a new monthly routine of special reports that will be provided exclusively to MacroBusiness subscribers. The Australian economy’s better than expected recovery, driven by unprecedented fiscal and monetary support, has delivered the biggest and broadest property price boom for generations. All five major capital city markets have experienced astonishing rebounds
The nation’s preliminary auction clearance rate rose over the weekend – to 76.4% from 73.6% the prior weekend – despite the worsening virus outbreak in Sydney. Sydney’s auction clearance rate rose to 76.5% from 71.6% the prior week; albeit of fewer auctions (661 versus 765). Melbourne’s clearance rate fell slightly to 75.3% from 75.9% off
Modelling by KPMG shows that house buyers across Australia are now paying a ‘Covid premium’. This premium will increase the average price of a house in Sydney by about $125,000 by December 2023, to $1.24 million. By contrast, the average house would have been around $1.12 million at the end of 2023 if the COVID-19
The auction market has been hit hard by Sydney’s lockdown, with the final national clearance rate falling to 72.1% from 75.4% the prior weekend off a big decline in auction volumes (2,168 versus 2,960 the prior weekend). As shown in the next table, Sydney’s final clearance rate fell to 70.5% from 77.5% the prior weekend
CoreLogic’s head of research, Eliza Owen, has published new research looking at the impact of lockdowns on Australia’s property market. Owen finds that while transaction volumes were temporarily hit, there was a strong catch-up period. Moreover, prices were resistant to the lockdowns: Auctions Longer social distancing periods had far lower average auction volumes… More properties
Analysts are shocked that Australians have taken umbrage with being spat upon daily by China. They are even more shocked that this might mean that China’s intentions are less than benign. The Guardian is outraged: More than four in 10 Australians are worried China may attack Australia, according to new polling, expressing a level of
In the Q&A to yesterday’s speech to the Economic Society of Australia, RBA governor Phil Lowe hosed down speculation that interest rates would be lifted to cool the property market: “I sometimes read commentary that we’ll raise interest rates to choke-off housing prices. And with housing prices rising quickly, the Reserve Bank will raise interest
In the week ended 8 July, the CoreLogic daily dwelling values index surged another 0.44%: All major markets recorded rising values: Quarterly price growth remains turbo-charged at 6.26% across the five major capitals. Sydney (8.31%) continues to lead the way, followed by Brisbane (6.20%), Adelaide (5.74%), Melbourne (4.66%) and Perth (2.09%): So far in 2021,
The collapse of international migration and the exodus of Melburnians to greener pastures has driven house rents in Australia’s second biggest city to the equal lowest in the nation, according to Domain’s latest rental report. As shown in the table below, the median asking Melbourne house rent is now only $430 per week. That’s unchanged
In the May 2021 Budget the Morrison Government broadened eligibility to the Pensions Loan Scheme (PLS): the government sponsored reverse mortgage scheme that allows retirees to borrow up to 150% of the aged pension rate against the equity in their home and is open to all retirees (not just pensioners) over the age of 60.
SQM Research has released its Stock on Market data for June, with total listings nationally down another 4.0% with all capitals but Darwin recording falls: Over the year, listings fell 21.6% nationally, again with all capital city markets but Darwin recording falls. New listings (<30 days) nationally fell by 9.1% in June: Whereas old listings
The end of the Morrison Government’s HomeBuilder grant on 14 April 2021 is beginning to have an impact on the Australian dwelling construction market with approvals and construction loans falling in May. Yesterday’s dwelling approvals data from the Australian Bureau of Statistics (ABS) reported a 7.1% decline in dwelling approvals in May, led by a
CoreLogic leading mortgage index is a pretty good way to track what’s coming in ABS owner-occupier data. Suddenly, it ain’t look so crash hot: The index level is still high but the recent tumble is quite substantial and steep relative to past winter pullbacks. This may reflect lockdowns or just be a part of the
CoreLogic has released data showing that the median Australian property has risen in value by a whopping $69,633 from their pre-COVID peak: As shown above, Canberra’s property values have risen the most ($122,711), followed by Hobart ($103,799) and Sydney ($97,932). The only two markets where home values remain below their pre-COVID highs are Western Australia
Via AIG: Boom topping out. Full report.
CoreLogic’s preliminary report on the weekend’s auctions reported a significantly lower clearance rate on the back of Sydney’s lockdown. The national preliminary clearance rate fell to 73.6% from 77.5% the prior weekend. This was off significantly lower auction volumes, which fell to 2,177 from the prior weekend’s 2,976. Sydney’s auction clearance rate fell to 71.6%
The auction market ended June on a solid footing, recording a final national clearance rate of 75.4%, up from 74.1% the prior weekend. As shown in the next table, Sydney recorded a final clearance rate of 77.5%, up from 76.8% the prior weekend. Melbourne recorded a final clearance rate of 74.7%, up from 69.0% the
Domain has released its June Rental Vacancy Report, which has reported the lowest national vacancy rate on the company’s records at just 1.6%: According to Domain: All cities have returned to vacancy rates that are lower than pre-pandemic levels reported in February 2020, except Melbourne and Sydney. However, the number of empty rentals have reduced
The Australian mortgage market remained red hot in May, hitting new all-time highs according to new data released today by the Australian Bureau of Statistics (ABS). The total value of new mortgage commitments rose by a seasonally adjusted 4.9% in May 2021 to be up 95.4% year-on-year: As shown above, the record increase in new
Buying a high-rise apartment has become a game of financial Russian Roulette. Over recent years we witnessed a proliferation of building faults and flammable cladding infernos at sites including Lacrosse, Neo200, Opal, Mascot, Zetland, Campsie, among others. In 2019, Four Corners aired a segment entitled Cracking Up, where building law expert Bronwyn Weir encapsulated the
