Auction Results 12 Aug 2017

The preliminary results from Domain are out, and, yes, we still have momentum so far as auction clearances are concerned. Sydney has a higher clearance rate at 73.7% compared with Melbourne, at 71.7, but more property continues to be sold in Melbourne. Most of the action remains in these two main centres.

Brisbane cleared just 41% of 78 scheduled auctions, Adelaide did a little better at 62% of 64 scheduled, and Canberra achieved a massive 91% clearance on 51 scheduled auctions. In fact, on several metrics the Canberra market could be said to be the most buoyant – helped by the Public Sector pay rises!

Things may change a bit a the results are finalised over the next few days. But seems to support our view that the market remains quite hot.

When Will Rates Rise? – The Property Imperative Weekly 12 Aug 2017

Demand for housing credit remains firm, which explains the ongoing high auction clearance rates. So has the property market further to run and what is the RBA likely to do?

Welcome to the Property Imperative weekly to 12th August 2017, our weekly digest of the latest finance and property news.

Company results released this week included the full-year outcomes from the CBA,  half year from AMP, and 3rd Quarter results from NAB. There was a common theme through them all. Mortgage loan growth has continued, and thanks to loan and deposit repricing, net interest margins have improved in recent months. This was also helped by more benign conditions in the international capital markets. In addition, overall provisions for bad loans were reduced, despite higher delinquency rates in the troubled Western Australia market.  We think the banks, overall, will continue to churn out larger profits as they use repricing to cover the extra regulatory costs and bank taxes.  In fact savers are taking a lot of the pain, especially on term deposits, as rates fall even lower, this gets less focus compared with all the commentary is on mortgage interest rates.

Mortgage Brokers were in the news again, this week, with NAB suggesting that changes do need to be made to “improve the trust and confidence that consumers can have in brokers”.  UBS put out a research note suggesting that broker commissions will be trimmed soon, whilst CBA reported a fall in the volume of new mortgages sourced via brokers, compared with their branch channels. We are beginning to see significantly differentiated distribution strategies, with some suggesting a migration to digital will reduce the importance of the branch, whilst other lenders, like CBA are investing in new, smaller, outlets with the expectation of driving more business generation through them.   On the other hand, CBA, as a result of John Symond exercising his put option, is also buying the remaining 20% interest rest of Aussie Home Loans. Interesting timing!

RBA Governor Philip Lowe’s Opening Statement to the House of Representatives Standing Committee on Economics today contained a few gems.

Globally monetary policy stimulus may be reducing, whilst low wage growth is linked to a complex range of global factors, from technology, competition and lack of security. Locally, business investment is still sluggish, and the RBA says, household are adjusting to lower wage growth plus rising power prices and the burden of household debt.  They still back 3% growth in the years ahead. The next move in the cash rate will be up, but not for some time yet.

Ten years ago this week, French bank BNP Paribas wrote a warning of the risks in the US securitised mortgage system. Later, UK lender Northern Rock saw customers queuing to get their money from the bank, a reminder of what happens when confidence fails.  Later still, Lehmann Brothers crashed. In the ensuing mayhem, as banks fell from grace and were either left to die, or were bailed out – mostly with public funds – and as mortgage arrears rocketed away in many northern hemisphere centres.

Whilst much has changed, and banks now hold more capital, we still think there are risks in the financial system. In fact, if the RBA does raise rates here, there is a risk we could have our own version of the GFC. It was the sharp move up in mortgage rates which finally triggered the crash a decade ago. We have very high household debt, high home prices, flat income, rising living costs and ultra-low, but rising mortgage rates. We also have a construction boom, with a large supply of new (speculative) property, and banks that have around 60% of their assets in residential property. Arguably lending standards are still too lose despite recent tightening (which note, had to be imposed on the lenders by the regulators!). So the RBA will need to lift rates carefully to avoid a crash.

Lending data from the ABS showed owner occupied housing lending rose 0.5% in trend terms in the past month – or around 6% annually, well ahead of inflation.  Lending for new construction rose. But lending for investment housing fell 0.85% month on month, despite ongoing strong demand from investors in Sydney and Melbourne. First time buyers were more active in June, they made up 15.0% of transactions, compared with 14.0% in May. Property demand is actually stronger than a couple of months ago as confirmed by the still strong auction clearance rates. Other personal finance fell 1.8%.

The trend series for the value of commercial finance commitments rose 1.8%. Non housing fixed lending rose 3% and revolving credit rose 1.8%. So, perhaps, finally, we see lending by business beginning to gain momentum! This is needed for sustainable growth. The ANZ Job ads were also stronger in July, and the NAB business confidence indicators were also higher. All pointing to strong business investment, perhaps.

On the other hand, the July DFA household finance confidence index was lower with the average score at 99.3, down from 99.8 last month and below the neutral setting. However, the average score masks significant differences across the dimensions of the survey results. For example, younger households are considerably more negative, compared with older groups. This is strongly linked with property owning status, with those renting well below the neutral setting (and more younger households rent these days), whilst owner occupied home owners are significantly more positive. We also see a fall in the confidence of property investors, relative to owner occupied owners. Across the states, we see a small decline in confidence in NSW from a strong starting point, whilst VIC households were more confident in July.

The driver scorecard shows little change in job security expectations, but lower interest rates on deposits continue to hit savings. Households are more concerned about the level of debt held, as interest rate rises bite home. The impact of flat or falling incomes registers strongly, with more households saying, in real terms they are worse off. Costs of living are rising fast, with the changes in energy prices, child care costs and council rates all hitting hard. That said, the continued rises in home prices, especially in the eastern states meant that net worth for households in these states rose again, which was not the case in WA, NT or SA.

Sentiment in the property sector is clearly a major influence on how households are feeling about their finances, but the real dampening force is falling real incomes and rising costs. As a result, we still expect to see the index fall further as we move into spring, as more price hikes come through. In addition, the raft of investor mortgage rate repricing will hit, whilst rental returns remain muted.

So, overall, we see a mixed and complex picture, with demand for property remaining firm, lending still rising, incomes still under pressure and lenders able to buttress their profits thanks to lifting margins. This puts pressure on the RBA, who continues to warn of the risks to households but then cannot lift rates very far. This tension will all play out, not just in the next few months, but over the next two or three years.

And that’s the Property Imperative to 12th August 2017. If you found this useful, do subscribe to get future updates, and check back for the latest installment.

June Home Lending Says Property Has Further To Run

The latest data from the ABS shows home lending finance in June 2017 remained robust. In fact, overlaid with the latest home price data, and auction clearance rates, it looks like the property market has further to run, at least in the main markets of Sydney, Melbourne and Canberra. Loans for construction were up.

Or in other words, household debts will continue to climb, despite the “risk trimming” measures imposed by APRA.

Whilst the trend estimate for the total value of dwelling finance commitments excluding alterations and additions was flat, owner occupied housing commitments rose 0.5% while investment housing commitments fell 0.9%. However, in seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 0.8%.

In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 15.0% in June 2017 from 14.0% in May 2017.

More first time buyers are entering the market now, reacting to the attractive rates selectively on offer.

Overlaying the first time buyer investors, which was also quite strong, we see momentum building.

In original terms, in the past month, owner occupied lending flows grew by $7 billion, whilst investment loans grew $2.1 billion.

Looking at the trend adjusted stock, the mix of loans remained about the same at 35.9%, and overall loans pools grew.

We see a rise in borrowing for both owner occupied and investment construction.

So here are the trend adjusted flows, with owner occupied loans on the rise, investment loans down a little, and refinanced loans also down.

Worth noting that if you remove refinancing though, investment loans are still 46% of new loan flows. This is hardly indicative of a cooling of the property market.

Finally, the ABS says that in trend terms, the number of commitments for owner occupied housing finance fell 0.2% in June 2017.

In trend terms, the number of commitments for the construction of dwellings rose 1.9% and the number of commitments for the purchase of new dwellings rose 1.3%, while the number of commitments for the purchase of established dwellings fell 0.5%.

Finance for new dwellings appear to be getting a second wind with all eight state and territories showing growth in owner occupier loans for new dwellings during the month.



First Week of August Returns a Preliminary Auction Clearance Rate of 71.5 per cent

From CoreLogic.

The first week of August saw fewer auctions held across the combined capital cities, with 1,846 held, down from the 1,987 auctions held the previous week, however higher than the 1,540 auctions one year ago. The preliminary auction clearance rose to 71.5 per cent, after the previous week saw the final auction clearance rate fall slightly to 68.7 per cent (revised lower from a preliminary clearance of 70.7%).

Over the last month, auction volumes have remained relatively steady and while clearance rates have shown a softening, final results have been consistently in the high 60 per cent range since the first week of June. Across the two larger auction markets, Melbourne continues to show resilience to softening conditions relative to Sydney, with Melbourne’s clearance rate sitting in the mid-high 70 per cent range for another week (75.7 per cent), while Sydney’s preliminary auction clearance rate increased over the week (71.5 per cent). Last week Sydney recorded its lowest rate of clearance so far this year (65.4 per cent).


Heads You Lose, Tails They Win – The Property Imperative Weekly 05 Aug 2017

The latest data suggests mortgage delinquencies are rising, as the number of mortgaged households increase. Yet the RBA is bullish about future growth prospects, despite anemic retail spending, a stronger dollar and home lending reaching another new record. So what’s going on?

Welcome to the latest Property Imperative weekly to 5th August 2017.

We released our mortgage stress and default modelling for Australian mortgage borrowers, to the end July 2017.  Across the nation, we estimate more than 820,000 households are now in mortgage stress (compared with last month 810,000) with 20,000 of these in severe stress. This equates to more than a quarter of borrowing households.  We also estimate that nearly 53,000 households risk default in the next 12 months.

We have been tracking the number of households in stress each month since 2000, and since a small easing in February 2016, the number under pressure has been rising each month.  The RBA cash rate cuts provided some relief, especially directly after the GFC, but now mortgage rates appear to be more disconnected from the cash rate as banks seek to rebuild their margins.

There were more mortgage rate changes this week, with Virgin Money increasing the standard variable rates for owner occupied and investment interest only loans for new and existing customers and also increasing the fixed interest only rates for both owner occupied and investment loans. The increases ranged from 15 basis points, or 0.15%, up to 50 basis points for a 3 year lower LVR owner occupied fixed loan.

Teachers Mutual Bank increased the interest only variable rate by 20 basis points to 5.66% p.a. Interest only rates for the Solution Plus Home Loan rose by between 30 and 50 basis points depending on the LVR. Rates span between 4.49% p.a. and 4.67% p.a. They decrease rates for the principal & interest Home Loan by 15 basis points to 4.39% p.a for those borrowing between $240,000 and $499,999 where the LVR is greater than 80% and less than or equal to 90%.

CBA doubled the waiting period for customers seeking to switch to an interest-only repayment loan from 90 days to 180 days. This is a further move to try to reduce the proportion of IO loans held, following regulatory pressure to meet the 30% limit.  CBA has already lifted interest rates, tightened lending criteria and throttled back applications via mortgage brokers.

Once again we see a differential shift, with interest only loan rates being lifted, whilst rates on some owner occupied principal and interest loans below specific LVR’s and value are reduced. This underlines the current behaviour where specific types of “low risk” borrowers are being recognised. Expect more of the same from other market participants.

A new report by the Australian Housing and Urban Research Institute (AHURI) revealed than an estimated 1.3 million households  – around 14% of Australian households –  are in housing need, whether unable to access market housing or in a position of rental stress. This figure is predicted to rise to 1.7 million by 2025. This includes 373,000 households in New South Wales, where the number is expected to increase by 80% to more than 670,000 by 2025.

The newly released Household, Income and Labour Dynamics in Australia (HILDA) data showed that home ownership among 18 to 39-year-olds has fallen from 36 per cent in 2002 to a new low of 25 per cent. On top of that, between 2002 to 2014, the average mortgage debt of young homeowners increased by 99 per cent in real terms, from $169,000 to $337,000.  In fact, the decline in home ownership has been greater than the decline in owner-occupied households. This is largely because adult children are living with their parents for longer.

More broadly, HILDA also highlighted growing inequality, something which we have been discussing for some time. It is parents passing wealth down to their children that are once again starting to define who gets into property and who doesn’t – we’re going back to a 1950s-style class division. Our research suggests the average hand-down from the Bank of Mum and Dad is more than $85,000.  This rising inequality was also confirmed by the latest ME Bank Survey. They say the overwhelming majority of Australian households (68 per cent) saw their incomes stagnate or fall. Only 32 per cent got pay rises – the lowest in three years.

There are other barriers to property purchase. Data from the HIA suggested that the average stamp duty bill paid by an Australian owner-occupier increased by 16.4% to $20,725 over the past 12 months. And that’s nationally with the average cost in Sydney and Melbourne — Australia’s most expensive housing markets where just under 40% of Australia’s population live — substantially higher at $29,105 and $26,870 respectively. The median dwelling prices in both those cities has more than doubled since the start of 2009, according to CoreLogic. The HIA says recent changes to stamp duty in NSW mean that foreign investors now pay almost $100,000 in transaction taxes to acquire a standard apartment in Sydney – almost four times as much as local buyers.

Fitch Ratings says Australia’s mortgage arrears increased by 12bp QoQ to 1.21% at end-1Q17, due to seasonal Christmas/holiday spending and possible difficulties faced by consumers because of low real-wage growth.

Suncorp, underwhelmed the market with their FY17 annual results. Their housing portfolio now sits at $44.8 billion (up from $44.27 billion in 2016), with 66 per cent coming from the “Brokers”. The results were helped by overall lower provisions and the repricing of mortgages, but despite this, bank NIM fell. Past due home loans rose from 0.79% last year to 0.85% in FY17, and they have significant portfolio concentrations in QLD and WA.

Genworth, the listed Lenders Mortgage Insurer (LMI) released their 1H17 results, and as a bellwether for the mortgage industry, we see continued pressure on mortgage defaults, up 5 basis point, to in WA 0.86% and QLD 0.72%, and a fall in higher LVR lending leading to lower volumes of new premiums being written, but at higher prices.  The average original LVR of new flow business written in 1H17 was 82%.

The latest credit aggregates from the RBA to June 2017 shows continued home lending growth, up 0.5% in the month, or 6.6% annually. Business lending rose 0.9%, or 4.4% annually, and personal credit fell 0.1% or down 4.4% over the past year. However, they changed the seasonally adjusted assumptions, so it is hard to read the true picture, especially when we still have significant reclassification going on. The net value of switching of loan purpose from investor to owner-occupier is estimated to have been $55 billion over the period of July 2015 to June 2017, of which $1.3 billion occurred in June 2017.

In original terms housing loans grew to $1.69 trillion, another record. Investor home lending grew 0.5% or $3.13 billion, but this was adjusted down in the seasonal adjusted series to 0.2% or $1.13 billion. Owner occupied lending rose 0.9% or $9.83 billion in original terms, or 0.7% or $7.34 billion in adjusted terms.

APRA’s latest monthly banking statistics for July 2017 reconfirms that growth in the mortgage books of the banks is still growing too fast. The value of their mortgage books rose 0.63% in the month to $1.57 trillion. Within that, owner occupied loans rose 0.73% to $1,017 billion whilst investor loans rose 0.44% to $522 billion. Investor loans were 35.18% of the portfolio. The monthly growth rates continue to accelerate, with both owner occupied and investor loans growing (despite the weak regulatory intervention).  On an annual basis, owner occupied loans are 6.9% higher than a year ago, and investor loans 4.8% higher. Both well above inflation and income growth, so household debt looks to rise further. The remarkable relative inaction by the regulators remains a mystery to me given these numbers. Whilst they jawbone about the risks of high household debt, they are not acting to control this growth, do not seem worried.

Indeed, the latest RBA Statement on Monetary Policy released today appears to be very upbeat. Despite forecasting growth down a bit in the near term, they are still holding the view of growth of 3% plus later, supported by and improving international economic outlook, a rise in business investment, strong exports and low unemployment. If this is correct, then it seems to me conditions would be right to lift the cash rate towards the neutral position (which as we saw recently they hold to be 2% higher than current levels). That said, many economic commentators think the RBA is overly bullish, given high household debt, flat income growth, and risks in the property market.

Within the statement they acknowledge that slow real wage growth is likely to weigh on consumption, especially if households expect the slow growth to continue for some time and  ongoing expectations for low real wage growth remain a key downside risk for household spending. The recent sharp increase in the relative price of utilities poses a further downside risk to the non-energy part of household consumption to the extent that households find it hard to reduce their energy consumption; this is likely to have a larger effect on the consumption decisions of lower-income households.

They also make the point that some households may also feel constrained from spending more from of their current incomes because of elevated levels of household debt. This effect would become more prominent if housing prices and other housing market conditions were to weaken significantly. Household debt is likely to remain elevated for some time: housing credit growth overall has been steady over the past six months, but has continued to outpace income growth.

That said, the composition of that debt is changing, as lenders respond to regulators’ recent measures to contain risks in the mortgage market. Investor credit growth has moderated and loan approvals data suggest this will continue in coming months. Also, new interest-only lending has declined recently in response to the higher interest rates now applying to these loans and other actions by the banks to tighten lending standards.

They held the cash rate again on Tuesday, and said rent increases remain low in most cities, but Investors in residential property are facing higher interest rates. There has also been some tightening of credit conditions following recent supervisory measures to address the risks associated with high and rising levels of household indebtedness. Growth in housing debt has been outpacing the slow growth in household incomes.

The latest Australian Bureau of Statistics (ABS) Retail Trade figures showed that the trend estimate for Australian retail turnover rose 0.4 per cent in June 2017 the same rate as in May. Compared to June 2016, the trend estimate rose 3.6 per cent. The trend by state shows Tasmania and ACT ahead of the average, with Western Australian and NT, continuing to trail.

So standing back, we have a mixed picture, but one where household debt is still rising, income remains under stress, and costs rising. As a result, we think the drag on growth is stronger than the RBA suggest. Pressure on budgets will constrain spending.  But, here’s the thing, if they are right, we should expect cash rate rises sooner, adding more pressure on household budgets. Looks like its heads you lose, tails they win – borrowing households will remain under the gun for some time to come, and the property market is at the centre of the storm.

And that’s the property imperative weekly to August 5th 2017

Auction Results 05 Aug 2017

The preliminary results from Domain are in, and they show a slowing of the volume of auctions on offer. Clearance rates though remain quite healthy.  Melbourne at 73.7% leads the charge, with 420 sold. Significantly higher than Sydney. Nationally 738 were sold, compared with 946 last week and 789 last year.

Brisbane cleared 55% of 98 auctions, Adelaide 67% of 31 auctions and Canberra 67% of 52.

Affordable housing shortfall leaves 1.3m households in need and rising

From The Conversation.

A new report by the Australian Housing and Urban Research Institute (AHURI) reveals, for the first time, the extent of housing need in Australia. An estimated 1.3 million households are in a state of housing need, whether unable to access market housing or in a position of rental stress. This figure is predicted to rise to 1.7 million by 2025.

To put it in perspective, 1.3 million is around 14% of Australian households. This national total includes 373,000 households in New South Wales, where the number is expected to increase by 80% to more than 670,000 by 2025 under the baseline economic assumptions of the modelling.

The first graph below shows the average annual level of housing need to 2025. The second, showing the percentages of households, permits a direct comparison by state. NSW and Queensland are in the worst position. The ACT is calculated to have the lowest proportional level of need.

What does this mean for households in need?

Housing need is defined as:

… the aggregate of households unable to access market-provided housing or requiring some form of housing assistance in the private rental market to avoid a position of rental stress.

This includes potential households that are unable to form because their income is too low to afford to rent in the private rental market. These households would traditionally rely on public housing and community housing to meet their needs. However, more and more are being forced into the private rental market, paying housing costs they are unable to afford without making significant sacrifices.

To 2025, on average 190,000 potential households in NSW will be unable to access market housing in a given year. The graph below is the most revealing as it illustrates the gap between affordable housing demand and supply.

The lack of social housing and subsidised rental housing prevents such households forming under affordable conditions. Many will manage to form but will have to spend well over 30% of their income on housing costs to do so, putting them in a position of financial stress.

The results also reveal the increasing pressure the affordable housing shortfall places on the housing assistance budget, notably Commonwealth Rent Assistance.

The absence of a significant new supply of affordable housing – there has been no large-scale program since the National Rental Affordability Scheme (NRAS) began in 2008 – has left state governments trying to find ways to plug the affordability gap.

Responses have been largely on the demand side, such as first home buyer concessions recently announced in NSW. But such incentives are no use for low-income households. To help them, intervention needs to be on the supply side.

How does Australia compare?

The AHURI research built on ideas emerging from research into housing need in the UK. It revealed interesting differences between the two countries.

UK government policy prior to 2010 emphasised the role of the planning system in helping to substantially increase affordable housing supply. This reflected evidence from England and Scotland that found a link between low levels of new housing supply and higher and rising house prices.

In this project, we found plenty of evidence of deteriorating housing affordability in Australia. But we did not find a particularly strong relationship between housing supply and price growth. This might reflect how other drivers of deteriorating housing affordability are more important in Australia – such as tax incentives for investors.

These findings suggest we need to look more closely at how new supply and investment demand interact, and in what circumstances boosting new supply is likely to improve affordability.

From our analysis of individuals’ labour market circumstances and incomes, it was also clear that the Australian workforce has not escaped the erosion of secure, full-time employment opportunities seen in other countries.

The combination of widespread insecure, part-time employment opportunities, high housing costs and low supply of rented social housing means the housing of many working Australians is extremely precarious.

How was the research done?

The research modelled housing need at the state and territory level to 2025 using an underlying set of economic assumptions and interrelated models on household formation, housing markets, labour markets and tenure choice.

The models were underpinned by data from the Housing, Income and Labour Dynamics in Australia (HILDA) Survey, the Australian Bureau of Statistics (ABS) and house price and rent data.

This research delivers, for the first time in Australia, a consistent and replicable methodology for assessing housing need. It can be used to inform resource allocation and simulate the impact of policy decisions on housing outcomes.

The intention is to further develop the model to assess housing need at the level of local government areas.

So, what are the policy implications?

The scale of the affordable housing shortfall requires major action from federal and state governments.

NRAS had its problems but at least delivered a supply of below-market housing. Australia cannot rely on the private sector to deliver housing for low-income households without some form of government subsidy as it is simply not profitable to do so.

The question is what government is going to be prepared, or even able, to spend big to close the affordable housing supply gap?


Authors: Steven Rowley, Director, Australian Housing and Urban Research Institute, Curtin Research Centre, Curtin University; Chris Leishman, Professor of Housing Economics, University of Adelaide


The overlooked victims of Australia’s runaway property market

From The New Daily.

Young people may have been hit hard by Melbourne and Sydney’s steep property prices, but experts warn that soaring home values are creating victims at all levels of the market, including people who already own homes.

This week’s Household, Income and Labour Dynamics in Australia (HILDA) report showed that home ownership among 18 to 39-year-olds has fallen from 36 per cent in 2002 to a new low of 25 per cent.

On top of that, between 2002 to 2014, the average mortgage debt of young homeowners increased by 99 per cent in real terms, from $169,000 to $337,000.

But there are other victims overlooked in a national housing debate that focusses on the young.

An inflated property market has wide-ranging repercussions for many demographics, according to Greville Pabst, executive chair of WBP Property Group and a judge on The Block TV show.

“Socially, you’re going to see a very big divide between the haves and the have nots,” Mr Pabst said.

Here are a few examples of the potentially overlooked casualties of Australia’s real estate boom.


It’s no surprise that many renters don’t fare well in expensive property markets, as the demand for rentals pushes up prices.

The latest Department of Health and Human Services’ rental affordability data revealed that a mere 5.7 per cent of new lettings were deemed affordable over the March quarter — the lowest since the report was first compiled in March 2000.

“Renters face the dilemma of paying off someone else’s mortgage and not building up equity in a property which can be a good form of security and wealth,” Bessie Hassan, property expert at, said.

“There’s greater flexibility with being able to move around but they also don’t have the freedom to renovate or upgrade the property to suit their personal tastes.”


Unfortunately for singles, the dream of home ownership is even tougher because they need to service a mortgage on one income.

“This can greatly affect the areas or regions where you can afford to live and your ability to manage the ongoing costs such as repairs and maintenance,” Ms Hassan said.

“Singles may need to reside within fringe suburbs as they’re priced out of inner-city suburbs.”

In particular, pregnant single women may have to leave the workforce or pull back to part-time or casual work, which can impact their ability to afford a home, Ms Hassan said.

“Single borrowers may also be seen as higher-risk borrowers [by banks] due to a lack of dual income.”


While owner-occupiers have fewer problems than renters or singles, an inflated property market often leaves families or couples beached in the one spot for many years.

Upgrading to a bigger home becomes too expensive once agent fees, marketing costs and stamp duty are taken into account.

“If you’re selling a property for $1 million, then you are looking at paying at least $80,000 in stamp duty and associated costs,” property lecturer Peter Koulizos said.

“That’s money that could be spent on renovation instead. So people are staying put more; there’s less mobility.”

Greville Pabst at WBP Property Group added that many Generation Xers had secured mortgages at very low interest rates, but were also highly leveraged.

“Interest rates will go up and some of these people may be in trouble.”


While many pensioners own their own homes, they’re often saddled with expensive land tax bills.

“As the value of their property goes up so does their tax bill, which they struggle to pay because they’re asset rich, but cash poor,” Mr Pabst said.

Furthermore, according to the HILDA report, young adults are living with their parents longer: 60 per cent of men aged 22 to 25 and 48 per cent of women the same age were living with their parents in 2015, compared with 43 per cent and 27 per cent respectively in 2001.

Parents may own their own home, but it could be full of their adult children. Or they may find themselves digging into their retirement savings to help their kids onto the ladder.

“Those that can afford it are now helping their children buy a home,” Mr Pabst said.

“That is the great divide that is only going to increase.”

There’s a growing problem in Australia’s housing market

From Business Insider.

Australia’s population is increasing, as are the number of residential dwellings that exist.

However, despite more people and property in Australia, housing turnover levels are not — they’re falling in most of Australia’s capitals.

This chart from CoreLogic shows monthly housing turnover levels across Australia in the past two decades. The group has used a 6-month moving average to better demonstrate the trend seen over that period.

Source: CoreLogic

While there has been some modest movement over that period in either direction, it’s essentially been flat from the levels seen two decades ago.

So what gives? Why are housing turnover levels static despite more people and property now existing in Australia?

According to Cameron Kusher, research analyst at CoreLogic, it comes down to “inefficiencies in the housing market”.

“This is likely due to a number of reasons including the impost of stamp duty which discourages transactions, higher prices which lead to greater commission on sales and no real incentives for people to downsize homes when their children leave or they reach retirement,” he said in a note released today.

“These inefficiencies also have an economic impact as the high cost of exiting and entering the housing market is likely to impact on labour mobility as home owners may choose not to move for employment because of these high costs.”

According to research released by Australia’s Housing Industry Association (HIA) today, the average stamp duty bill paid by an Australian owner-occupier increased by 16.4% to $20,725 over the past 12 months.

And that’s nationally with the average cost in Sydney and Melbourne — Australia’s most expensive housing markets where just under 40% of Australia’s population live — substantially higher at $29,105 and $26,870 respectively.

The median dwelling prices in both those cities has more than doubled since the start of 2009, according to CoreLogic.

This is not only exacerbating housing affordability constraints in those cities, contributing to lower housing turnover levels, but also contributes to higher stamp duty costs, which, as Kusher suggests, provides a disincentive for families, couples and individuals to move to more appropriate housing for their circumstances.

Despite the reluctance of state governments to forego this revenue cash cow, there’s surely a case to reduce transnational costs to encourage more mobility in the housing market.