Rethinking Housing Affordability: Speculative Boom or Structural Burden?

Transcription

1 Rethinking Housing Affordability: Speculative Boom or Structural Burden? Terry Rawnsley Affordable Housing Australasia Melbourne 14 th 16 th November 2016

2 Overview Housing is a multidimensional topic (social, cultural and economic issues). Is the property market at risk of a bubble? Understanding the systemic drivers of housing demand by housing type The implications of an oversupply of high density developments Exploring housing as a global asset class Overall Summary 2

3 Is there a Property Market Bubble? 1. Current Australian properties prices 2. Examine key Household balance sheet metrics a) Debt to income b) Interest payment to income c) Debt to assets d) Who is carrying the debt 3. Examine the historical performance of major capital city housing markets 4. Discuss why is Australia different 3

4 Australian Housing is Expensive City House Non-house Sydney ~$900,000 ~$680,000 Melbourne ~$610,000 ~$500,000 Perth ~$530,000 ~$430,000 Brisbane ~$500,000 ~$400,000 Hobart ~$350,000 ~$300,000 Canberra ~$600,000 ~$430,000 Source: ABS Residential Property Price Indexes: Eight Capital Cities 4

5 Capital Cities Property Price Index Source: ABS Residential Property Price Indexes: Eight Capital Cities 5

6 Capital Cities Property Price Index Average Annual Growth Rates 17% 2% 11% 8% 3% 7% Source: ABS Residential Property Price Indexes: Eight Capital Cities 6

7 Debt to Income Ratio For every $1 of income households have $2 of debt Source: ABS Australian System of National Accounts 7

8 Interest Payable to Disposable Income Interest payments on debts take up 7% of disposable income Source: ABS Australian System of National Accounts 8

9 Debt to Asset ($ Billions) For every $1 of assets households have 19 cents of debt Source: ABS Australian System of National Accounts 9

10 Real Median Owner-Occupier Housing Debt by Income Quartiles ($000) Higher income households have been increasing their debt Source: Reserve Bank of Australia 2014 Dollars 10

11 Real Median Owner-Occupier Housing Debt by State ($000) Source: Reserve Bank of Australia 2014 Dollars 11

12 Capital Cities Property Price Indexes Australia is made up of very different housing markets Source: ABS Residential Property Price Indexes: Eight Capital Cities 12

13 Sydney Property Price Index Source: ABS Residential Property Price Indexes: Eight Capital Cities 13

14 Sydney Property Price Index Source: ABS Residential Property Price Indexes: Eight Capital Cities 14

15 Sydney Gross Domestic Product (GDP) Source: SGS Economics and Planning Australian Cities Accounts

16 Sydney Gross Domestic Product (GDP) Weaker GDP growth lower property growth High GDP growth high property growth Source: SGS Economics and Planning Australian Cities Accounts

17 Melbourne Property Price Index Source: ABS Residential Property Price Indexes: Eight Capital Cities 17

18 Melbourne Property Price Index Source: ABS Residential Property Price Indexes: Eight Capital Cities 18

19 Melbourne Unemployment Rate Unemployment rate increased from 4% to 12%. Dwelling prices fell 4% Source: SGS Economics and Planning Australian Cities Accounts

20 Perth Property Price Index Source: ABS Residential Property Price Indexes: Eight Capital Cities 20

21 Perth Property Price Index Source: ABS Residential Property Price Indexes: Eight Capital Cities 21

22 Perth Gross Domestic Product (GDP) Economic growth was the lowest since the 90s recession. Dwelling prices fell 5% Source: SGS Economics and Planning Australian Cities Accounts

23 New York Property Price Index New York is an example of a housing bust 30% drop from its peak Source: ABS Residential Property Price Indexes: Eight Capital Cities and S&P/Case-Shiller NY-New York Home Price Index 23

24 Why is Australia Different? 1. Australian property prices don t bust tend to stagnate 2. Robust economic (and population growth) drive property growth 3. High credit standards 4. Implications of loan default on future credit applications 5. Cultural values related to homeownership 6. More recently there is an undersupply of housing in well located locations 24

25 Housing Demand & Supply 1. The systemic drivers of housing demand by housing type 2. Implications of an oversupply of high density developments 3. Use Sydney and Melbourne as examples of what is happening 25

26 Australian Dwelling Approvals Source: ABS Building Approvals, Australia 26

27 Sydney Dwelling Approvals Source: ABS Building Approvals, Australia 27

28 Sydney Dwelling Approvals Source: ABS Building Approvals, Australia 28

29 Sydney LGA Employment Growth Source: SGS Economics and Planning Unpublished Data 29

30 Melbourne Dwelling Approvals Source: ABS Building Approvals, Australia 30

31 Melbourne Dwelling Approvals Source: ABS Building Approvals, Australia 31

32 Melbourne LGA Employment Growth Source: SGS Economics and Planning Unpublished Data 32

33 Impact on Rental Growth Higher supply is reducing the increase in rents. The market is adjusting. Source: ABS Consumer Price Index 33

34 Structural Problem of Expensive Housing Impacts on labour participation and labour mobility Impacts on social exclusion within cities Focusing on Sydney as an example 34

35 Labour Force Participation Source: ABS Labour Force Survey 35

36 Affordable Housing & Access to Jobs Source: SGS Economics and Planning Attracting jobs to outer urban growth areas 36

37 Sydney LGA Employment Growth Source: SGS Economics and Planning Unpublished Data 37

38 Sydney Dwelling Approvals Source: ABS Building Approvals, Australia 38

39 Affordable Housing & Access to Jobs Source: SGS Economics and Planning Attracting jobs to outer urban growth areas 39

40 Impacts on the Rental Market Source: SGS Economics and Planning Rental Affordability Index 40

41 Sydney SEIFA Source: ABS Socio-Economic Index for Areas 41

42 Summary Expensive housing is impacting on labour force participation and social exclusion in our cities. Jobs are more concentrated in the CBDs. Housing markets are now responding by providing more housing in accessible locations. But there are still social exclusion issues related to access to jobs. 42

43 Housing as a Global Asset Class Housing has long to the cornerstone of Australia wealth. In the global economy, housing is increasingly becoming a part of global trade. Global capital looking for a higher return or safe haven. However, population flows are the factor which are having the greatest impact. 43

44 Net International Migration Source ABS Australian Demographic Statistics 44

45 Overall Summary Australian housing is expensive, but the metrics don t point to a bubble. Economic growth and population growth are the systemic drivers of housing demand by housing type. The Sydney market looks at less risk of a high density glut than Melbourne. Expensive housing is impacting on labour force participation and social exclusion in our cities. Global capital want to purchase our housing. We should build more to sell to them and domestic buyers. 45