The shortfall, revealed in a report by Access Economics yesterday, came after the Australian Bureau of Statistics confirmed Queensland was the second fast growing state in Australia last year, having attracted more than 58,000 overseas migrants and 16,700 migrants.

Access Economics director Chris Richardson said the implication for housing affordability in the Sunshine State was “serious”.

According to Mr Richardson, the state was shy more than 17,500 dwellings.

“A clash between the strength of population demand for housing and the worsening lack of supply of housing is building rapidly,” he said.

Meanwhile, the median house price in Brisbane surged past $500,000 for the first time in the December quarter.

Mr Richardson said this result reflected the traditional equation of supply and demand.

Ironically, property inflation was tipped as the catalyst, which could halt population growth in its tracks.

Chief among the reasons for the undersupply, Mr Richardson said, was the limited release of land on the urban fringe in South-East Queensland for new `greenfield sites’ and the limited finance obtainable by Queensland developers in the wake of the global credit crunch.

The report by Access Economics, for the Urban Development Institute of Australia, showed commercial lending for residential development in Queensland plunged 60 per cent in the past two years, compared to the national decline of 10 per cent.

That coincided with the collapse of numerous second-tier lending firms, primarily based on the Gold Coast, and also Suncorp’s withdrawal from the commercial lending market.

Yet property analyst Michael Matusik has questioned figures pointing to an undersupply in Queensland’s residential property market.

“Circumstances have changed in the last six months to suggest that maybe we are, firstly already building enough dwellings to cater for demand, and that we might even be heading for an overbuild if current trends continue,” Mr Matusik said.

He said the record number of interstate migrants to Queensland had retained their cultural living habits, which did not demand thousands more detached dwellings.

“Nine out of ten new migrants live with friends and relatives upon arrival. Most rent, on average for three years thereafter, before eventually buying,” Mr Matusik said.

“Overseas migrants often live in large household arrangements, with their typical household size being a full person more than the Australian average.

“This fact might, in part, explain why the average household size is starting to rise again across many parts of the country. Net overseas migration is not the big multiplier many of our learned friends make it out to be.”

Indeed, the Access Economics report noted an unusually high increase in the average number of people living under one roof in Queensland in the past three years.

But it also pointed to a return to more one person households, as overseas migration levels “self-corrected” in the coming five years.

“As the ABS has noted, lone person households are projected to increase particularly quickly in Queensland,” the report says.

If Queensland simply wanted to keep the number of people per household constant – at the current level 2.6 people per household – then it would need to have housing starts some 65 per cent higher than they were over the past year, Mr Richardson said.

He said the social implications of the housing shortfall would include a rise in the number of multi-generational households, whereby Generation Y stayed at home until the age of 26, before housing their retired baby boomer parents in later years.

“Higher house prices will make it difficult for younger Queenslanders to afford to buy their own home, pushing up the average number of people per household even further over time,” Mr Richardson said.

He said the challenge was for more medium density development, which was affordable.

Solutions canvassed in the Access Economics report were welcomed by developers in Brisbane yesterday, who have long led calls for reduced infrastructure charges and land taxes.

UDIA Queensland president Warren Harris said infrastructure charges typically accounted for 34 per cent of residential development costs.

“This cost is passed onto the buyer and it has a direct impact on affordability,” Mr Harris said.

The report suggested the government foot the bill for improved infrastructure in the outer, greenfield suburbs.

“There is less housing an demand in area where there is a lack of efficient transport, employment opportunities and access to other social services and community infrastructure,” the report says.

“This in turn means a lack of incentive for developers to convert land in those areas into housing even if there is sufficient land release.”

In order to achieve a happy medium, Mr Harris called for a development taskforce to be established in Queensland.

“This problem is so dire and so immediate we need an immediate response, therefore we are calling for an industry recovery taskforce to be established,” he said.

“We need members from state government, local government, and the development industry, and if necessary federal government, all talking and negotiating on proper outcomes for the housing industry.”

MARISSA CALLIGEROS brisbanetimes.com.au

Property Investment in Australia

Posted via email from scott banks real estate group

Australia’s property bubble: it’s here

It’s official: 60 per cent of investors believe Australia has a property bubble. A confluence of housing shortages, low interest rates, speculative fervour and last year’s move by the Rudd Government to relax foreign ownership rules on real estate have turbo-charged house prices.

But as John Maynard Keynes famously said: “A market can stay irrational longer than you can stay solvent,” and those looking for an imminent correction will find little evidence for it in investor attitudes.

In the latest Investor Pulse survey, conducted jointly by BusinessDay and marketing research group Colmar Brunton, there is no indication that investor appetite for property will slow down any time soon.

When asked if it was a good time to buy an investment property, 67 per cent agreed that it was because the supply shortage would support rental and price yields. Another 21 per cent thought prices would stagnate and only 12 per cent believed that prices would fall.

On the future of the boom, 32 per cent could see it running another year, 44 per cent for two or more years, and 7 per cent forever. Contrary to recent years, respondents ranked Sydney as the strongest property market in the current cycle, followed by Melbourne, Brisbane, Perth, Adelaide, Canberra, Darwin and Hobart.

This is all scary stuff.  Investors played a key role in expanding the property bubble through the late 90s. In 1990 investment loans represented 16 per cent of Australian mortgages at $13 billion. By 2008 that figure had ballooned 2400 per cent to $310 billion, or 31 per cent of total mortgages. Investor attitudes matter.

Despite 71 per cent of investors hypothetically believing there could be a property crash, the more common attitude is that other factors will keep the momentum going. They rank the following factors in order of importance: housing shortages; low interest rates; foreign purchases of Australian property; speculative fervour; negative gearing and moral hazard.

The survey revealed, however, that moral hazard may be much larger than investors themselves admit, with 42 per cent expecting the Rudd Government to introduce another round of first home buyer grants if the current boom shows signs of ending.

The increase in foreign purchases also cannot be under estimated, following the decision last March by the federal government to relax its rules on property ownership. This abolished mandatory reporting of such acquisitions in a bid to ”enhance flexibility in the market”.

Before the change, foreign investment in Australian residential property had already started increasing, up 33 per cent to $20.4 billion. It is not known what the figures stand at in 2010 but there are suggestions that more than 30 per cent of homes auctioned are purchased by foreign speculators. If this is the case, it will dramatically add to the property bubble.

It is a potential political time bomb. Numerous readers have written in complaining that they are being priced out of the market by overseas bidders.

One Investor Pulse reader wrote recently: “It would explain the highly overpriced market and the reason why local wages are not enough to purchase the average house. To rely on high immigration to keep the economy temporarily out of trouble is one thing, but allowing this foreign speculation to keep Australians out of their own market should be opposed with urgency.”

Another Investor Pulse reader wrote: “So much for Rudd’s ‘working families’. Australians should get priority over foreign investors for what limited housing we have. How can Australians compete when Chinese borrow at home at 1 per cent? The Australian property market is strong and doesn’t need to be propped up. The Government should act now to stop this misguided and UN-Australian policy. Shame on you, Mr Rudd, for selling out on Working Families.”

Investors are divided on possible solutions to the outsized price rises. A majority, 54 per cent, are against interest rate rises. When it comes to government policy, investors ranked cutting stamp duty as their best solution, just ahead of building more public housing and re-limiting foreign investment.

Cutting immigration and negative gearing ranked lower. Another solution was also clear in the fact that 52 per cent of investors admitted they would reconsider the value of an investment property if the government reversed the 1999 capital gains tax cuts.

Investors clearly acknowledged the need for government intervention with 91 per cent seeing no solution coming from the private sector. Half reckoned banks will not lend to developers because their exposure to mortgages is already too high. Most of the other half agreed rather with the statement that the banks see the risk in overvalued prices and want to keep the market tight.

There was little sympathy for younger Australians with 55 per cent of investors agreeing first-home buyers were best off saving a deposit to get into the property market and 24 per cent suggesting the young could buy on the city fringe.

Another 27 per cent of surveyed investors already owned an investment property and 16 per cent were are seriously considering buying one.

smh.com.au ADELE FERGUSON aferguson@fairfax.com.au

Property Investment News – Australia

Posted via email from scott banks real estate group

MELBOURNE’S property market is shaping up to record its strongest pre-Easter results due to insatiable demand.

Of the weekend’s 884 auctions, 623 properties were sold, generating a clearance rate of 87 per cent when the 145 properties sold before auction are taken into account.

Buxton Carnegie’s Paul Podbury said a three-bedroom house on 250 square metres at 321 Alma Road, Caulfield North, sold for $815,000, well above its $695,000 reserve.

”It is staggering that for a house that hasn’t been touched in the 42 years since it was built, people are paying upwards of $800,000.

”Given the numbers we’re getting at our auctions and also the number of people putting their hands up, it would seem as though demand is still very, very strong,” he said.

Frank Valentic, of Advantage Property Consulting, said high prices were concerning – a two-bedroom Elwood apartment at 3/5 Beach Avenue, bought four years ago for $425,000, sold at auction for $737,000. ”Salaries aren’t going up at that rate, so it’s going to be harder and harder for people to get in the market,” he said.

Michael Szulc, of Cayzer Real Estate, said a double-fronted brick home at 31 Langridge Street, Middle Park, sold for $1.82 million, several hundred thousand dollars above reserve.

”Despite murmurs that the market is softening, there were no signs of that at all this weekend – the market’s red hot.”

In Kew, Noel Jones chairman Adrian Jones said six bidders competed for 224 Cotham Road, which sold for $1.7 million, after being quoted between $1.3 million and $1.4 million.

JPP buyer advocate Catherine Cashmore said sale prices were starting to fall within the expected ranges. She said 83A Shamrock Street, Brunswick, which sold for $695,000, was quoted at between $550,000 and $600,000, with comparable sales placing it in the high $600,000s.

A property sold by Hocking Stuart’s David Wood at 45 Wright Street, Middle Park, went for $1.91 million, above a reserve of $1.8 million.

”I don’t think the market’s easing at all. There’s probably a little hiatus coming with the grand prix next weekend and then Easter, so what’s been on offer in the last little while will probably be it for the next month or so,” Mr Wood said.

More than 80 per cent of the 155 properties in the $1 million-plus bracket were sold.

Almost 1080 auctions will be held in the coming week.

Source: NATALIE PUCHALSKI  The Age

Property Investment News – Australia

Posted via email from scott banks real estate group

Australia faces a housing affordability ”time bomb” – primed by a dysfunctional planning system, a chronic undersupply of homes, and unrealistic expectations from buyers, according to the chief of one of the nation’s largest homebuilders.

Stockland managing director Matthew Quinn, in a speech in Sydney, said Australia’s current shortage of 200,000 homes and an annual shortfall of 60,000, would balloon to 800,000 by 2020, if no reforms were undertaken.

”There’s a faint ticking that I can hear and it’s getting louder,” he said in a speech yesterday. ”The fuse is burning, and current metropolitan planning strategies are inadequate for our growing and ageing population.”

House prices in Australia climbed 13.6 per cent in 2009 alone after a decade in which they posted increases of about 170 per cent, according to the Australian Bureau of Statistics. Residential real estate prices have soared as Australia’s economy nears notching up two decades of growth without a pause.

Over the same period, Australia has lured more immigrants, adding to housing demand. The federal government’s 2010 intergenerational report estimates Australia’s population will swell to 35.9 million people by 2050 from its current level of 22 million.

“The average first home buyer today cannot afford to pay the median house price – not even close,” Mr. Quinn said, with the average median house price at $485,000.

Mr. Quinn blamed what he called ”a total disconnect between the different levels of government…without action, housing affordability problems are going to get worse.”

Calling Australia’s population growth a ”federal government responsibility,” Mr. Quinn lamented the lack of cohesion between the federal government, the state planning policy and infrastructure delivery, and local council approvals.

Mr. Quinn said building smaller homes is another factor that could ease the shortage and the housing affordability issue, with Stockland reducing its average lot and house sizes for customers.

”Australia is one of the world’s most urbanised nations, with over three-quarters of our population living in major cities and the overwhelming majority in our five largest cities alone,” he said.

”Despite this, our cities are by no means densely populated,” with Australia’s capital cities people per square kilometre density ranking behind Los Angeles, Paris and Tokyo.

Mr. Quinn’s speech was delivered to the Australia Israel Chamber of Commerce.

Stockland posted after tax profits of $214 million for the half-year to December 2009, according to Morningstar.

Source: theage.com.au & http://kerbsideappeal.wordpress.com/

Property Investment News

Posted via email from scott banks real estate group

Better use of available city land has been identified as a key to

 maintaining Melbourne’s liveability – and halting urban sprawl.

SKYSCRAPERS have been declared the answer to Melbourne’s urban sprawl by two leading developers, with both revealing plans for more towers as the city struggles to cope with a surging population.

Developer Lorenz Grollo, whose family co-owns the Rialto Towers on Collins Street, is planning to build more skyscrapers modelled on the iconic building.

And Tony Brady, the developer of Melbourne’s next skyscraper, says he will take on more high-rise projects once his 67-storey development on the site of the old Stork Hotel on Elizabeth Street – scheduled to begin this year – is finished.

Mr. Brady, who specialises in residential developments, has three other mid-sized towers of more than 30 storeys under construction, but says he is looking to go higher.

The developers have declared their intentions as The Age today launches a series examining how Melbourne’s planners will cope with a predicted population of 7 million by 2050, an increase of more than 3 million people.

Better use of available city land has been identified as a key to maintaining Melbourne’s liveability, and halting urban sprawl.

But the skyscraper plans drew immediate criticism from designers including high-profile urban planner Rob Adams, director of Design and Culture for the City of Melbourne.

Professor Adams, a leading voice in the push for more targeted low-rise developments across the city, said high-rise developments often had more to do with profitability and image than ”sensible” town planning.

”Really what it is about is buying the land as cheaply as you can and then maximising the development on it. That’s all about dollars. It’s got nothing to do with good design or sustainability, it’s all about economics,” he said.

High-rise buildings tended to be less environmentally efficient than low-rises, he said, and greater housing density could still be achieved without the need for more towers.

Mr. Grollo would not reveal specific plans for a new tower, but said he was looking for high-profile Melbourne sites that could accommodate skyscrapers. ”We are looking at some potential developments in the future which are largely modelled on Rialto,” he said.

”Skyscrapers are part of Melbourne’s future without a doubt. With population increasing, density in building and cities is critical.”

Mr. Grollo argued that there was ”a better, greener outcome when you get a bigger mass on the one footprint”.

”Having said that, it needs to take into consideration the right urban design and how the building sits within its context of a wider precinct. You can’t just build tall buildings for the sake of it,” Mr. Grollo said.

”I’m certainly not a believer in massive towers like in Dubai, that’s bordering on ridiculous, but you go to New York and the average buildings there are 50-odd storey’s. Just because of our land mass here, 50 storey’s seems very high.”

Mr. Brady also argued that skyscrapers were the answer to urban sprawl in Melbourne.

”If you’ve got all these people coming in, the only thing that will stop urban sprawl is to build more skyscrapers because if you don’t spread up you’ve got to spread out,” he said.

Architect and heritage consultant Nigel Lewis warned against further skyscrapers in the Melbourne CBD, calling instead for a moratorium on high-rise developments in key city precincts such as Flinders Lane, Chinatown, and Swanston and Bourke streets.

He said if developers wanted to build more skyscrapers, maybe they should do so at Docklands where they could ”have fun and compete with each other about who can build the biggest … Perhaps the more stuff they put there the better at this stage.”

Skyscrapers are expensive to build and hard to finance because they cannot be done in stages. When it was completed in 2006, the Eureka Tower at Southbank became the city’s tallest building at 297 metres (91 storey’s), eclipsing the Rialto at 242 metres (60 storey’s).

Height restrictions vary between the city’s precincts and can be specific: one planning control for the City of Melbourne permits a maximum height of 23 metres for new buildings, to allow the Parliament buildings to remain ”visually dominant”.

Out of the city, each local government has its own planning scheme with its own height controls and neighbourhood considerations, further adding to the complexity of high-rise development.

kerbsideappeal.com.au & theage.com.au

Posted via email from scott banks real estate group

Housing is hotting up, but Melbourne will stay the cooler city

MELBOURNE house prices are on fire – $1 billion worth of auctions every weekend. And now the experts tell us values in the city could outstrip Sydney. Certainly there have been some eye-catching numbers: Melbourne’s median price at $494,000 would certainly seem to be challenging Sydney’s $545,000.

And though it seems like Sydney – where a car space in North Bondi recently went for $240,000 – has long been dearer than Melbourne, the gap only opened up in the early 1980s.

According to property research group Residex, as late as 1979 Melbourne was dearer, with a median house price of $46,000 against Sydney’s $42,000. But around 1980 a combination of factors started to put Sydney way ahead of Melbourne – multinationals preferred Sydney, most of the ASX big listed companies centred there and the city’s population began a climb to beyond four million.

Over the past decade, Sydney experienced regular lunges in prices that Melbourne simply could not match. The price gap by 2004 was huge – Melbourne had barely cleared a median of $300,000 and Sydney had broken $500,000.

Then something happened that’s as regular as a heartbeat – the numbers swung back in favour of Melbourne. This time the rebalance was more dramatic because Sydney had overshot.

Just now Melbourne is having a strong run – immigration, pent-up demand, a stable state government and inevitable momentum from positive headlines push prices up. Meanwhile Sydney seems relatively flat with some weakening of population growth, a post-Olympic hangover (the full effect came after 2004 despite the games occurring four years earlier) and a series of ineffective NSW state governments.

It’s not surprising to hear Residex managing director John Edwards suggest he would ”not be surprised” to see Melbourne prices pass Sydney at some point in the next decade.

Maybe it could happen – briefly – a short-term technicality. But to jump beyond that and suggest that Melbourne house prices will soon surge to the point that Melbourne will become permanently more expensive than Sydney city for houses is nonsense.

It won’t happen. Here’s why: Melbourne home prices are coming to a peak. Scott Keck of Charter Keck Cramer is a valuer, not a real estate agent … a very important distinction. He says: “Prices are strong, but Melbourne certainly won’t eclipse Sydney; there is just too much free land in Melbourne, it’s flat at the city fringe, the residential blocks can go on forever. I believe we’ll see the city prices cool soon.

”In contrast, in Sydney you have the Blue Mountains, state forests up against the city … it’s a totally different market.

What’s more, all the indications are that it’s Sydney that is going to rebalance, very soon.

NSW is at the epicentre of the nation’s housing shortage – a shortage that even the Reserve Bank is publicly worried about following comments by Deputy Governor Philip Lowe a few days ago.

SOURCE: JAMES KIRBY theage.com.au

Property Investment News – Australia

Perth suburbs dominate property list   

Hobart’s Oakdowns topped the list with the value of units in the suburb posting an annual average growth over the past 10 years of 34.6 per cent. The median cost of a unit is $275,000.    

Herne Hill came in second with a house in the suburb posting an average annual growth rate of 34.4 per cent. The median price of a house in the area is $595,000.    

Other Perth suburbs featured in the top 10 were Jindalee (33.3 per cent), Bertram (33.3 per cent), Hammond Park (33.1 per cent) and Wattle Grove (32.6 per cent).    

Completing Perth’s domination in the top 20 were Aubin Grove (32.3 per cent), Butler (32.1 per cent), Carramar (29.9 per cent), Darch (29.3 per cent), Sinagra (29 per cent) and Beeliar (28.5 per cent).    

Regionally, Western Australia made two appearances with Collie representing    

Regionally, Western Australia made two appearance with a house in Collie posting an average annual growth rate of 34 per cent. The town came sixth in the top 20 best performing regional centres.    

Beachlands, near Geraldton, was the other WA regional area to be mentioned with a growth rate of 31.7 per cent.  

SOURCE: Rebecca Lawson wabusinessnews.com.au  

 Property Investment News – Australia   

SOURCE: christopherjoye.blogspot.com   

Property Investment News – Australia   

Sydney house prices tipped to push higher.

Property prices in Sydney’s inner and middle rings could rise by up to 10 per cent this year, according to an industry association.

The Real Estate Buyer’s Agents Association of Australia said much depended on the effect of rising interest rates and tighter loan conditions.

But property prices will rise in key centers in Queensland, NSW, Victoria, South Australia and Tasmania, with Sydney in particular set to benefit from pent-up demand and increases of up to 10 per cent, it said.

REBAA president Byron Rose said that after a busy end to 2009, investors continued to show keen interest into 2010, with more buyers around than properties.

‘‘We expect the current high levels of buyer activity to continue for the first half of the year,’’ he said in a statement outlining the association’s market predictions. ‘‘But we’re also ready for buyers to pull back from the market once the reality of rate rises hit home and as affordability in some states continues to decline.’’

The REBAA’s NSW spokesman Rich Harvey said key areas of interest for property investors in Sydney include the northern beaches, inner west, eastern suburbs and select parts of the North Shore.

‘‘In regional areas, we favour the Hunter Valley, Orange, Port Macquarie and the far northern coast of NSW,’’ he said. ‘‘I believe the property market is in a rising phase, which should continue solidly for the next three years.’’

Mr Harvey said with the unemployment rate declining, subdued inflation, rising migration and population rates, demand for housing was rising.

‘‘Sydney, in particular, will see solid capital growth because of our spectacular beaches, clean environment, beautiful harbour and wide range of housing styles,’’ he added.

Standard variable home loan rates have been on the rise since the Reserve Bank of Australia began hiking official rates late last year and are now around 6.85 per cent.

The central bank last moved on March 2 when it lifted its cash interest rate by 25 basis points to four per cent, leading the major banks to make similar hikes.

AAP

SOURCE: smh.com.au

Property Investment News – Australia

Residential housing: The next bubble or boom? 

Last week I took part in a debate entitled “The Great Residential Housing Debate – the next Bubble or a legitimate Boom?” at the annual conference for Perennial Investment Partners; I put the Bubble case and Chris Joye of Rismark International presented the Boom case (here is my paper and my presentation). As is well-known, Australia is one of the few countries in the OECD not to experience two quarters or more of falling GDP as a result of the GFC, and probably the only country that has not experienced a fall in its property market.  

The conference was held twice, firstly in Melbourne on Wednesday February 24th, and then in Sydney on Friday 26th. There were roughly 400 people in the audience on both occasions, all of whom were customers of Perennial – with the majority (roughly 75%) being financial planners. The conference employed an electronic voting mechanism that let participants answer general questions, as well as rate the speakers. In our debate, it was used to work out where people stood on the “Bubble vs Boom” spectrum both before and after the debate. A “1″ indicated a complete Bear who expected property to crash and advised getting out now, while a “10″ was a complete Bull who advised “Buy, Buy, Buy”.  

Prior to our debate in Melbourne, the average score was 4.9. This surprised me, because I expected the audience to be generally pro-property; however a score of below 5.5 indicated that overall the audience was bearish on property (since the average of the ten numbers from 1 to 10 is 5.5).  

After our debate, the score was 5.2 – a small move in favour of the bullish position, but still slightly in the bearish camp. Chris commented that this was “about even” and “too close to call” as he left the stage, which I thought was a fair enough summary of the outcome.  

So I was stunned when Crikey asked me to respond to the report Chris had given them of the Melbourne debate (“Reflections on Cage Match Mk 1″), which included the statements that:  

“So I think I pretty comprehensively monstered Steve Keen at our debate in Melbourne yesterday. That was certainly the feedback from those who attended (there were 500)… While I felt I was able to intellectually tear Steve apart limb-by-limb, I will say this: he is a lovely guy. Very diplomatic and humble in defeat…”; and  

“Unfortunately, the electronic scoring in yesterday’s debate was a bit convoluted: it measured the shift in the audience sentiment from bearish (Steve) to bullish (Chris) before and after the event. On that basis, I won. But I think a simpler Chris versus Steve voting system would have made the difference much more striking…”  

Huh? The rest of the post was of a similar vein – though there were occasional caveats such as “As I noted in my presentation, Steve has made some valid criticisms of conventional economics, and its neglect of debt capital market imperfections. And he deserves some kudos for anticipating a credit crisis” (gee, thanks!), even this was immediately followed by “But whatever strengths he possesses are overwhelmed by his propensity to make silly statements.”  

I had no intention of commenting on the debate prior to seeing this hit a national news site, but of course this couldn’t be ignored – though at the same time it didn’t deserve to be taken seriously. So I took a facetious approach – opening my reply with “I don’t know what Chris consumed after our talk at Perennial’s conference yesterday, but if he has any spare I’d like to try it at a party tomorrow night”, and concluding with the advice to Chris that, “Next time, after a conference, don’t consume anything, just take a cold shower” (I also pointed out the statistical fact Chris apparently missed, that the middle point in scores from 1 to 10 is not 5, but 5.5).  

Chris took this rejoinder very well – despite our fundamental differences over this issue, we get on well personally, and unlike some participants in this debate, he does have a sense of humour.  

And so we proceeded to Sydney. There the audience was slightly less bearish than in Melbourne: the average score prior to the debate was 5.3, just slightly below the neutral level. But after the debate, there was a significant shift towards the Bear case. The post debate score was 4.6.  

Chris had made the classic mistake of declaring victory at half-time, only to get a cold shower with the full-time result.  

Chris in part attributed doing poorly in Sydney to a couple of personal mishaps that morning prior to the debate – and he did say that he expected not to speak as well as in Melbourne before the debate in Sydney took place. That would certainly have been a factor.  

One other factor may be that I developed the numerical example used in this DebtWatch Report after the Melbourne conference. That gave the Sydney audience a clearer idea of why debt-deflation matters – and why the servicing cost of debt, which Chris insists is not high, is not the main problem with a debt-driven economy.  

Of course, I dispute the argument that debt servicing costs are not particularly high today. As the next chart shows, even though the RBA’s rate cuts have reduced the cost substantially from its peak, interest payments on mortgages in Australia today consume 7.5% of household disposable income. This is 1.65 times the average from 1976 till now.  

Yet this “average” itself is almost as high as the debt servicing costs in 1990, when mortgage rates were an astronomical 17% – 2.5 times as high as today’s rates. The primary driver behind this extreme rise in debt servicing costs is the factor Chris loves to ignore, the ratio of mortgage debt to income. This is more than five times larger today than it was in 1990 (130% of household disposable income versus 25% in 1990).  

In Sydney, the audience was advised (after our debate) to make a large change to its previous number if they were persuaded one way or the other; this may have made the final swing larger in Sydney than Melbourne.  

Finally, Chris later argued later that financial planners are inherently bearish on residential property, since they want to advise people to get into stocks instead. That is an argument that I would prefer to take with a grain of salt. Whether that is true or not as a general proposition, it appears that the people “Mum and Dad investors” might rely upon for advice about where to put their speculative dollars are on average telling them not to put them into residential property, which is the opposite advice to that one sees regularly in the Australian media today (sourced from commentators who clearly have no pecuniary interest in whether house prices rise or fall…). 

SOURCE: Steve Keen is Associate Professor of Economics & Finance at the University of Western Sydney, a fellow of the Centre for Policy Development and author of the best-selling book Debunking Economics  abc.net.au 

Property Investment News – Australia