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.
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of May. Quarterly mortgage credit growth continued to firm, rising for the 10th consecutive month to 1.6% – the highest rate of growth since August 2017: Owner-occupiers continue to drive mortgage growth, rising by 2.0% over the quarter
CoreLogic has released its daily dwelling values index for 30 June, which shows that property values across the five major Australian capital city markets surged another 1.9% over the month: The rise in values was strong across all major capital city markets except Perth, with Sydney and Brisbane again leading the way: Over the June
Treasury’s Intergenerational Report (IGR) projects that Australia’s population will swell by 13.1 million people (+50%) over the next 40 years, with 74% of this growth to come from net overseas migration (NOM), which is projected run at an average of 235,000 annually from 2025-26 onwards. If achieved, this would mean that Australia’s population would grow
Research from Cushman & Wakefield reveals that Sydney prime CBD office rents declined by 3% in the June quarter to be at $665 a square metre. This represents a fall of 24% on a net effective basis since the beginning of 2020. By comparison, Melbourne prime CBD office rents were at $380 per square metre
Moody’s with the note: As economic recoveries proceed at different speeds and stages around the globe, there is rising interest about when normalisation of monetary policy will begin. Many central banks have had interest rates sitting at the lower bound since providing unprecedented monetary support at the height of the global pandemic. Normalisation of the
CoreLogic weekly indexes said “The combined capital city preliminary auction clearance rate weakened slightly as volumes rose. There were 2,976 capital city homes taken to auction over the week, revising down from initial predicted volumes by 2% as the Sydney COVID outbreak grew resulting in four Sydney LGA’s going into lockdown. Of the 2,417 results
The Foreign Investment Review Board (FIRB) has released its 2019-20 Annual Report, which shows a decline in the number foreign residential real estate investment transactions but a rise in values across established and new dwellings: The number of foreign investment approvals for existing dwellings has fallen from a peak of 5,876 in 2015-16 to 1,101
CoreLogic’s preliminary report on the weekend’s auctions reported a stable clearance rate led by strong results from Sydney, despite the growing COVID outbreak. The national preliminary clearance rate fell slightly to 77.5% from 77.8% the prior weekend. This was off significantly higher auction volumes, which rose to 2,976 from the prior weekend’s 2,418. Sydney continued
CoreLogic has released its March quarter Pain & Gain Report, which reveals that 90.3% of sales nationally were at a profit – above the decade average of 89.0%: 90.6% of regional resales saw a profit through the March quarter, compared with 90.0% of capital city resales. The combined gains from these profitable sales also totalled
In the week ended 24 June, the CoreLogic daily dwelling values index surged another 0.48%: Sydney’s led the way again, with dwelling values rising another 0.59%. All other major capitals also rose in value: So far in June, dwelling values across the five major cities have soared 1.04%, led by Sydney: Quarterly price growth remains
CoreLogic released its final auction report for last weekend, with the final clearance rate rising to 74.1% from 73.6% the prior weekend, which was negatively impacted by Melbourne’s hard lockdown. As usual, Sydney drove the market recording a final clearance rate of 76.8% (up from 74.1%), whereas Melbourne’s final clearance rate rebounded to 69.0% from
Later than usual and still less cooling than normal but easing off. Via CoreLogic’s leading mortgage index: However, sales inventory remains deeply depressed despite a pretty good flow in recent months: Still only more price gains in this data. Full report.
Melbourne’s property price growth has slowed materially over the past month, as illustrated by the quarterly growth rate falling from a peak of around 6.2% to around 4.8% currently: The most obvious reason for the slowdown is Melbourne’s recent hard lockdown, which no doubt played a part. That said, the best short-term indicator of Melbourne
Suburbtrends has reported that 51% of the 2,809 house markets it assessed require families to spend more than 30% of their household income on rent, due to dwindling rental supply. It further found that there are 164 suburbs where families have to spend over 50% of their household income to pay the rent on an
Last month, the 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. Yesterday, NSW Planning Minister Rob Stokes introduced legislation for a new
One ‘benefit’ of having some of the world’s most expensive homes, alongside a high home ownership rate, its that it makes households ‘rich’. That’s the conclusion from the latest Credit Suisse Global Wealth Report, which has declared Australian households the worlds richest: The median Australian adult finished 2020 with a net worth of $US238,000, making
Earlier this month, the NSW Productivity Commission (PC) released a White Paper explicitly stating that Sydney’s housing shortage was caused by an unexpected boom in Sydney’s population when the federal government threw open the immigration floodgates in 2005: Much evidence suggests that our State, and Sydney in particular, has not delivered enough housing over many
Domain analysis indicates Sydney first-home buyers now need to save for seven years and one month for a deposit for an entry-level home, up six months on a year ago. Hobart first-home buyers also need to save for six months longer than they did a year ago, while Canberra first-home buyers need to save nine
For all intents and purposes, Perth Property should be experiencing a mega boom. Mortgage demand in Perth is through the roof. New mortgage commitments were up a whopping 106% in trend terms in the year to April, with mortgage demand typically leading dwelling value growth: The latest market indicators from the Real Estate Institute of
Robert Gottliebsen must have gotten off the blower to his mate ‘high-rise’ Harry Triguboff, because today’s drivel in The Australian reeks of blatant special pleading: NSW and Victorian governments are adopting strategies that, by accident or design, are slashing the building of new high-rise apartment towers… When overseas students return to Australia there will be
Yesterday, Treasurer Josh Frydenberg defended the Coalition’s proposed wind back of responsible lending laws, telling reporters they are essential to helping the economy recover from COVID: “Ensuring consumers and small businesses can get timely access to credit as the economy continues to recover from the COVID crisis”. “The reforms are intended to improve efficiency, reducing
CoreLogic’s preliminary report on the weekend’s auctions reported a higher clearance rate driven by strong results from Sydney. The national preliminary clearance rate rose to 77.8% from 77.4% the prior weekend. This was off significantly higher auction volumes, up to 2,418 from the prior weekend’s 1,426 (which was negatively impacted by the Queen’s Birthday holiday).
CoreLogic released its final auction report for last weekend, with the final clearance rate rising to 73.6% from 70.6% the prior weekend, which was negatively impacted by Melbourne’s hard lockdown. As usual, Sydney drove the market recording a final clearance rate of 74.1% (down slightly from 75.6%), whereas Melbourne’s final clearance rate rebounded to 68.8%
In the Q&A to yesterday’s Keynote Address at the Australian Farm Institute Conference, RBA Governor Phil Lowe stated that the Council of Financial Regulators (i.e. RBA, Treasury, APRA and ASIC) are actively looking at macroprudential tools to curb the mortgage/property market (listen from around the 34 minute mark): “The Council of Financial Regulators meeting last
In the week ended 17 June, the CoreLogic daily dwelling values index surged another 0.42%: Sydney’s led the way again, with dwelling values rising another 0.59%. All other major capitals except Perth also rose strongly in value: So far in June, dwelling values across the five major cities have soared 1.04%, led by Sydney: Quarterly
Digital Finance Analytics (DFA) has released its mortgage stress figures for May, which shows that around 41% of households remained ‘mortgage stressed’, up significantly from the pre-pandemic level of 32.9%: Martin North explains the rise in mortgage stress as follows: Our approach to measuring stress is unique in that we examine household cash flow –
The Australian property market continues to rebound hard out of the COVID-19 pandemic. Following a 2.6% decline in dwelling values across the five major capital city markets between 15 March (the unofficial start of the pandemic) and 13 October 2020 (the bottom), values have since risen by 13.1% across the combined five major capital city
The ABC has published another story touting tiny houses as “one way young people can afford real estate”: For Lucy and Jonty, the cost of their tiny house was around $120,000, including solar panels. That compares to the median Hobart dwelling value of $574,543, according to CoreLogic figures from May… It means they’re now committed
SQM Research has released its rental vacancy report for May, which reports a national rental vacancy rate of only 1.8% – the lowest level of vacancies since October 2012. Rental vacancies are zipped tight everywhere except Melbourne and Sydney, which have been hit hardest by the loss of international students, as illustrated clearly in the
The OECD has blamed Australia’s restrictive planning and zoning for driving the fourth sharpest property price increase in the developed world over the past 20 years: Paris-based OECD director of policy studies in the economics department, Luiz de Mello, said low interest rates had contributed to rising house prices. But restrictive regulations were also a
