Jul 20, 2017
by Spiro
More people, higher prices

Today I unpack one of the key drivers of house prices. There are a lot of reasons why house prices are high in Australia, and just keep on going higher. "Because there's a bubble" is the least convincing and laziest of all reasons. And I think that's its appeal. For people who can't be bothered unpacking the complex reasons that drive house prices, the "Housing Bubble" is very convenient. Anyway, I'm not going to unpack it all here, but one of the key factors driving higher house prices is solid population growth. More people means more demand for houses, means higher prices. There are a few general trends to keep in mind when we're talking about people. The first is that Australia's birth rate was looking a little dire in the late 90s. But it's picked up from the early

Jun 16, 2017
by Spiro
Why shares suck

Share indices overstate performance... by design! Ok, one of the debates I get drawn into all the time is "are shares better than property?" There's a few reasons why property is a better fit with me. I like it. I can understand it. I can also work with it. If I try to bump up a property's value by adding another bathroom, or doing a workover of the back garden, I can end up on the cover of "Better Homes and Gardens" magazine. But if I try and bump up a share's value somehow, it's called fraud and I end up in jail. You can't do anything with shares. It's totally out of your hands. It's all comes down to what your company is doing, and what the market is doing. (And if it's out of your hands, isn't it just gambling?) So I like property. And look, I can see why peopl

Jun 28, 2017
by Spiro
Yep, there's fewer houses to choose from now

Data is actually pointing to the strongest conditions in years. We're still waiting for any evidence that the property market is slowing. It's certainly not in the listings data. SQM reckon that the amount of stock on the market is now 7.5% lower than a year ago. That's substantial. And what it means is that if there's less houses for sale (less supply), and demand doesn't change (which I don't think it has) then prices have to go up. And if prices are going up then there can't be a market crash. (It's amazing how many people don't get this point.) It's a bit of mixed bag across the country. There were increases in Perth and Darwin, which you'd expect with a softer market. There was also an increase in Sydney, which was a little curious, but it's hard to read too muc

May 10, 2017
by Spiro
Where is the next wave of buyers coming from?

A good reason why price falls are just unlikely. Chinese buying seems to be coming off the boil lately. We don't have great data on it so it's a bit hard to tell, but that seems to be the 'vibe'. So want to know where the next wave of buyers is coming from? I'll tell you. Young locals. Right now there's a large (and growing) pool of young buyers looking to get into the market. Take a look at this chart here. This is home-ownership rates for each state (taken from the HILDA survey). Home ownership rates have been falling in Australia since the 90s, down to around 65% (of all households) in 2014. But there's been some particularly sharp falls in Victoria (from 74% to 66%) and NSW (68% to 62.5%). And what's been driving this trend decline in home-ownership? The

Apr 27, 2017
by Spiro
How the Australian game actually works

If you're not playing the game you're getting played. How do you get ahead in Australia? A bit of hard yakka, some application and commitment, and a little bit of luck, right? Australia is the land of opportunity, right? It'd be nice to think so, but this is just not the Australian economic model. The Australian economic model is to capture your own piece of economic turf, and to protect it at all costs, even if that means screwing over the general public. This isn't just a bitter rant because I had a bad experience on a tram. This is actually the way the Australian economy is organised. Take a look at this chart here from Deutsche Bank. This is market concentration for the major industries in Australia. Basically, there's only two industries in the whole of

Apr 20, 2017
by Spiro
APRA opens up the government's wallet

APRA just gave the government the cover it needs to throw a lot of money at the property market. Some of the big news over the past couple of weeks has been the new "macro-prudential" measures from APRA. The short of it is that on top of restricting investor mortgage growth to 10% pa or under, they're also wanting to get interest-only loans down to 30% of new lending. Right now, interest-only loans make up about 40% of new lending, and have for a while, so a speed-brake that brings it down to 30% could have a substantial effect on the market. However, I'd expect there be a bit of a rebalancing from interest only to principal and interest. I don't imagine that all that many people are only able to get a mortgage on interest only terms or not at all. So we'll see inter

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