A nation of savers. Life premiums to rise as claims jump. McKell Institute report Housing affordability PDF. The slow death of the housing dream. Illustration: Suzanne White Robert Harley When Rebecca Pietrzak, a 26-year- old Sydneysider, bought an apartment last weekend she joined a dwindling cohort of Australians. Why? Because fewer and fewer of us are buying a home. In 2002 and again in 2003, more than 600,000 houses and apartments changed hands according to RP Data. New house sales have collapsed; housing credit growth has slowed; renovations are being postponed; and prices have started to slide. Housing has been the outstanding risk-weighted investment of the last decade. Owner occupiers have stopped looking for quick turn gains. The tough question is why? Is it, like so much else in the economy, a structural response to the pressures of the mining boom and the new fiscal conservatism? Or is it a good old-fashioned cyclical downturn, the sort Australia had in the 1970s, 80s and 90s but which most of us have forgotten.
Today, the term most used about housing is “stabilising”. Without it, they will not buy. Cities vary. Ben Hurley. Housing shortage a myth, bears claim. Some see an oversupply of up to 250,000 dwellings on the market. Photo: Paul Rovere Australia, where home prices are falling at the fastest rate in more than two years, has a glut of properties and is set for a US-style crash, some experts say. The warnings from tax-reform advocate David Collyer, commentator Kris Sayce and academic Steve Keen contrast with banks and developers that claim a shortage of about 200,000 homes will underpin prices.
The housing bears say builders and lenders are pushing flawed government data to keep prices afloat in the English-speaking world’s costliest place to buy a home. None of us would bet our own house on the precision of our estimate of the extent of undersupply. “It’s important for the government and banks to keep the myth of a shortage alive,” said Mr Sayce, editor of Melbourne-based online newsletter Money Morning Australia. “Without it, prices drop, and negative equity results in housing repossessions and insolvent banks.” Advertisement Slowing market. Housing Shortage. Vested interest spruikers claim the Aussie house price problem is caused by a 'severe shortage' of houses and that we're 'running out of land'.
This 'shortage religion' has made people look for solutions in the wrong place. This post will finally debunk the shortage myth for once and for all! Census data proves there is an oversupply of property. Australia was building new dwellings well in excess of what was needed to cope with population growth across most of the country for many years. In the Northern Territory, the number of dwellings rose by 3 percent and the population WENT DOWN by 4.85 percent! The amount of empty dwellings has been rising at TRIPLE the rate of population growth in most states and across the country as a whole. Economic theory tells us prices in a free market are established by the balance between demand and supply. 1. So demand may increase instantly but supply on the other hand requires actual PHYSICAL DWELLINGS to be built on available land. Why Australia's housing balloon is shot | Steve Keen. Australia on the verge of rental crisis. House prices stabilise in March quarter.
For the quarter, Sydney values were up 1.1 per cent. Values also rose in Hobart, up 7.3 per cent, and Darwin, up 3.9 per cent. Photo: Louie Douvis Robert Harley House prices stabilised in the first quarter of the year, according to RP Data and Rismark. Capital city home values were up 0.2 per cent in the month of March and the market was flat for the first quarter of 2012. RP Data’s research director, Tim Lawless, said Sydney had been the primary growth driver. For the quarter, Sydney values were up 1.1 per cent. But the other capitals were flat or negative. Melbourne was down 0.8 per cent for the quarter, Brisbane down 0.4 per cent and Perth dropped 0.7 per cent. Canberra, which has recorded some conflicting figures in recent results, was flat for the quarter. “In March, it was the resource-rich states which delivered the strongest gains, with Perth, Darwin and Brisbane up 1.4 per cent, 1.1 per cent and 0.8 per cent respectively. Source: RP Data-Rismark.
Zoning laws and property rights. A couple of weeks ago, I sat down and read Matt Yglesias’ The Rent Is Too Damned High and Ryan Avent’s The Gated City back to back. Both were a pleasure to read, for their content, and for the opportunity to kick a couple of bucks to two of my fave bloggers behind an ennobling veil of commerce. As an avid reader of both authors’ online work, there were no huge surprises, but reading the ebooks took me deeper and inspired some more considered thought on their ideas. Ryan Avent and Matt Yglesias (and Ed Glaeser too!) Are separate humans with their own identities and ideas. But these “econourbanists” share a core view, and I hope they will forgive me if I consider their work together. In a nutshell, the econourbanists’ case is pretty simple: Cities are really important, as engines of the broad economy via industrial clustering, as enablers of efficiency-enhancing specialization and trade, as sources of customers to whom each of us might sell services.
You might say this is idiotic. Housing shortage will turn dire by 2020. Housing shortage a furphy we should not blindly accept. Residential - Australia's housing bubble is finally ending: Steve Keen. Mortgage debt is by far the largest component of debt in Australia today—government debt, which is the focus of political debate, is trivial by comparison (a quick caveat though—finance sector debt may be larger again than mortgage debt, if this claim, sourced from Morgan Stanley, is accurate— since it shows Australia’s aggregate private debt ratio as almost equal to the USA’s). The household debt to income ratio may have topped out now, after growing fivefold in the last two decades. Figure 2 shows the ratio of household debt to disposable income, which peaked at 149% of disposable income back in late 2008. Despite the enticement into debt given by the first-home vendor's boost, aggregate household debt never exceeded this pre-boost peak as a percentage of disposable income, since the fall in personal debt outweighed the rise in mortgage debt.
This huge rise in household debt compared to income has more than offset the falls in interest rates that occurred since the 1990s. Observations of an economist environmentalist: UPDATE - A chronic housing shortage: Myth or reality? I tried to contact Christopher Joye and Business Spectator to promote my previous post, which tried to unravel the mysterious reason for making dramatic claims of a chronic housing shortage. I would like to think that today’s comment by Joye at Business Spectator is in some way connected with my own analysis, but doubt it. He does not address the concerns I raised of defining the term shortage, nor does he address why house prices declined during 2008, or why the rate of price growth is slowing.
He does address a point that I have not made, about the large number of unoccupied dwellings in the census data, but I agree with his point about that data. Instead, I will have to take it as an expansion of his general argument. To be clear, the argument is centred on the fact that building approvals are at all time lows, while population growth is at historical highs. Blind Freddy can see this. But let me focus on the arguments at hand. Solution: elastify supply. 1. The reason is simple. 2. 3. Observations of an economist environmentalist: UPDATE 2 - A chronic housing shortage: Myth or reality? This is my final post on the housing shortage debate. After a little probing, I have isolated the single point that leads astray the data rich, but theory poor, residential property analysts. It is this. Housing shortage proponents believe that housing supply is not very responsive to price changes, or the jargon, supply in inelastic. As such, we can expect another house price spike as we wait for supply to catch up with expanding future housing demands.
I would like to think that today’s ABS release of building approvals data confirms my point, and makes a mockery of housing shortage predictions, such as those of Paul Braddick of ANZ. Braddick seems to acknowledge the housing shortage as some kind of inside joke when he writes: To look at the graph below, and make dire predictions based in extrapolating a one year trend in supply, in light of historical evidence, is probably one reason for the poor reputation of economists. Where is the theory in all these extrapolative forecasts? HIA warns of crisis in housing. Pessimism is building: Housing starts look like falling for the seventh time in nine years. Photo: Louise Kennerley THE number of new homes being built will plummet below levels seen during the 2008 global financial crisis if current building approval trends persist, a housing body forecasts.
Housing starts were forecast to fall by 12.4 per cent in 2011-12 to 137,820, following a decline of 5.6 per cent in 2010-11, the Housing Industry Association's quarterly National Outlook for Residential Building said. ''Local government building approvals point to the risk of housing starts falling below the 2008-09 GFC-induced trough,'' the HIA said. If residential construction follows this trend it will be the seventh fall in nine years. Advertisement ''We have been warning of an outcome of this magnitude for over 12 months,'' it said. Housing conditions are closely watched because building is a key driver of economic growth.
Victoria was building 70 per cent more homes per quarter than NSW. Housing affordability reaching crisis levels. Posted Thu 29 Mar 2012, 9:06pm AEDT The Australian Council of Social Service (ACOSS) national conference has heard that the lack of affordable housing has reached crisis levels. Housing experts say there is a shortfall of tens of thousands of social housing homes - a number that will grow unless funding increases. The new Housing Minister Brendan O'Connor told the conference he was there to take suggestions about how to tackle Australia's housing affordability problems.
He said the Government needed to explore future options "with an opening and enquiring mind". But his open mind closed quickly when it came to the question of reducing negative gearing and capital gains tax concessions. "The fact is that there are some things that the Government will not, at this point, consider," he said. "The Treasurer made it very clear that he expressly excluded some of those matters to which you refer. 'Perverse benefits' "Benefits that go to owner occupiers are perverse," she said.
"They're inequitable. Can banking take us all down? Housing's purchasing power surge | Christopher Joye. Disposable house price myths | Christopher Joye. ASX flags longer hours, easier listings. ASX makes peace with advisers over code. ASX may lose its monopoly on clearing. It may be the calm before the storm. Growth + income hard to find. The outlook for shares has brightened but fears remain over growth and profitability. Photo: Jim Rice Brendon Lau The mood on the market may have brightened considerably this year, but there is still much confusion when it comes to the question of whether growth or income stocks are the place to be for the next year. The tug of war between the two schools of thought essentially comes down to assumptions about where world growth is heading – with investors’ minds focused on worries about a hard landing in China, the sovereign debt crisis gripping Europe, the high oil price sparking a global recession and the sustainability of the US economic recovery.
Playing in the background to these fears, experts are still coming to grips with what the great de-leveraging cycle will mean for corporate profitability over the next few years for consumers and businesses. “Price gains may not be that great, but you have to focus on total returns at this juncture,” he says. Short bonds, long equities are clear winners. Fed puts stocks in sweet spot.
Shares retreat after global sell-off. Ratings agencies eye Swan’s budget. Positive growth measures spare austerity pain. Tanner fears Canberra super intervention. Patrick Durkin and John Kehoe Former federal finance minister Lindsay Tanner has warned that the government may be forced to intervene to shift the bias of superannuation funds away from shares to corporate bonds.
He criticised the $1.3 trillion super industry for putting the public’s savings at risk because of its narrow investment focus, which he likened to betting everything “on black at the casino”. “You are dealing with millions of individuals and their retirement living,” Mr Tanner said yesterday. “Minimising the extent to which individuals are going to really suffer badly, as some did during the global financial crisis and saw the value of their portfolios disintegrate underneath them, that is an important dimension.” In a rare foray into public policy debate since leaving office in 2010, Mr Tanner told the Ownership Matters conference in Melbourne he had examined the reasons for the lack of a corporate bond market in Australia since taking a position at investment bank Lazard. Economists seek PRODUCTIVITY reform. The Reserve Bank of Australia board left interest rates at 4.25 per cent for a fourth straight month yesterday, disappointing businesses and householders.
Photo: Louie Douvis Jason Murphy Economists have called for a long-term reform plan to make labour laws more flexible and reduce handouts to failing industries, after the central bank linked interest rate cuts to further productivity growth. The Reserve Bank of Australia board left interest rates at 4.25 per cent for a fourth straight month yesterday, disappointing businesses and householders. It hinted that inflation was well enough contained for it to consider future rate cuts that would depend on key data on prices on April 24. But governor Glenn Stevens repeated a phrase he had used only once before – last month – to say those forecasts assumed that “productivity growth in the economy increases somewhat as a result of the structural change now occurring”. Mr Hockey has promised a “souped-up productivity agenda”. Australia taps US for skilled workers.
Cities unprepared for freight growth. Apple Must Split Its Stock. Apple: Arguments Against A Dividend, Stock Split And Buyback. One of the most controversial debate topics in the investment community is what Apple (AAPL) should do with its cash. Should it pay a dividend, or should it shy away from redistributing its cash? And what about a stock split, or buying back shares? Surely after a move into triple digits, a stock split will make it easier for small investors to buy. Apple can certainly afford to buy back stock, given that it holds so much cash. After much thought, we have come to the conclusion that dividend, stock splits, and buybacks should be avoided, and we outline our arguments below.
As of the close of trading on March 13, 2012, Apple made another record high, closing at $568.10. As dramatic as Apple's rally has been, especially given its status as the world's largest company by market capitalization, this article is not meant to provide an analysis of where Apple will go from here, and if it is a buy or not. An Apple Dividend: Some Background Receive future articles by this author via email: CSIRO wins legal battle over wi-fi patent. Updated Mon 2 Apr 2012, 8:23am AEST The Federal Government has described a multi-million-dollar legal settlement over CSIRO's wi-fi technology as a major boost for the organisation. The settlement secures more than $220 million for CSIRO, which invented the technology in the 1990s. Wi-fi technology is used in more than 3 billion electronic devices worldwide, including personal computers, video games and mobile phones.
The settlement is the second successful litigation to be conducted by the CSIRO, which patented the technology and now has licence agreements with 23 telecommunications companies. Science and Research Minister Chris Evans says the latest agreement brings total revenue for the CSIRO's technology to almost $430 million. "It was important that Australia protect its intellectual property, and that those major companies who are selling billions of devices pay for the technology that they were using," he said. Senator Evans says Australian science is world-class. Respite for some from Basel III. ANZ wins mortgage battle with peers. Japanese banks have yen for Oz. Think China, think long term. China’s No.1 priority to boost consumption: Li. Big banks push for ‘notional’ weekends. BMA declares ‘force majeure’ on coal exports.