There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.
Each Saturday morning I like to share some of the ones I’ve read during the week.
The weekend will be over before you know it, so enjoy some weekend reading.
What Australia can learn from the US about fixing the housing crisis
There’s no shortage of headlines about Australia’s housing affordability crisis – but doe the US have an answer?
An article on Domain.com.au looks at what we can take away.
Australian home owners have been celebrating the upside of a doubling of median house prices in Sydney and Melbourne in recent years.
But the party may come to a crashing end when those same homeowners realise that their schools and hospitals will struggle to find staff who can live close enough to make their jobs worthwhile.
Housing is a basic human right and to access it, many essential service workers are already voting with their feet.
Some otherwise desirable parts of our biggest cities have lost up to one in five of their teachers, police and nurses to the city fringes in the decade to 2016, according to a recent University of Sydney study.
An earlier report from the Department of Infrastructure and Regional Development notes that Sydney commuters have already reached the globally-observed “Marchetti constant”: that once people spend, on average, 35 minutes getting to work, they start looking for jobs and opportunities closer to home.
After decades of inaction, the problem is now too large for any one party to solve, whether they be government, banks, not-for-profits or developers.
That’s why it’s time to find ways to spur investment in the affordable housing Australia needs.
Affordable housing must be understood in the context of sound future economic planning.
And in the face of astronomical house prices, affordable housing is not just the realm of the very disadvantaged, but increasingly the middle classes too.
I recently had the opportunity to visit the US as part of an Australian team to look at their affordable and social housing market.
We spoke to investors, developers, community leaders and government officials to find out what they are doing to make sure their cities have the adequate affordable housing.
The first thing that might surprise Australians is that there’s no lack of capital to solve their affordable housing issues.
They just mobilise it differently to us.
Institutional and private investors are long-term players in the US affordable housing sector.
Philanthropic interests are there too, and they’re making money for their endowments rather than treating housing as a charity case.
It’s a win-win situation for everyone – affordable homes become available for those who need them, and investors make a return on their investment, allowing them to go on to other developments.
The investors are there because the returns are strong and secure.
In fact, social and affordable housing investments were barely affected by the GFC – in stark contrast to most other housing property classes.
The other thing that might surprise Australians is the near universal acceptance that governments are central players in making affordable housing work.
The US might be the land of the free (market), but when it comes to making sure people have access to housing, all levels of government are packaging incentives and policies to deliver it.
That includes local governments, which are among the most active players.
They recognise that affordable housing is essential to making their communities work.
Contrast that with Australia.
Here it can seem that local councils are involved only to channel opposition from local residents, and to maintain the zoning and development policies that drive up the cost of housing.
While we can learn much from the US experience, there are also experiences we can strive to avoid.
There are more than 18 regulators involved in housing provision in the US.
We should aim to streamline and co-ordinate across governments to be able to respond to housing needs much more quickly.
We do also need to have honest and frank conversations with communities.
It is here at the individual level that we can all contribute to a solution.
Neighbours will need to dial down reflexive NIMBY (not in my backyard) opposition and become more accepting of the need for low cost housing as part of the essential makeup of our cities of the future.
For low-cost housing residents too, we will need to be upfront about what they can expect from affordable housing.
Increasingly, new developments will emulate the multi-family and rent-for-life approaches that are becoming prevalent in other big cities around the world.
While these don’t currently fit the traditional housing template in Australia they will be part of our future.
Australia’s much smaller economy also requires involvement from governments to kick-start and guarantee the investment structures that can deliver affordable housing in the longer term.
Read the full article here
Requiem for a construction bubble
Is the construction cycle heading to a close?
Construction sector now contracting
Private new house sales fell sharply in April 2018, as this phase of the construction cycle draws to a close.
The Australian National Accounts were surprisingly strong growth, recording 3.1 per cent growth over the year to March 2018.
Read the full article here
The RBA appears confident that tougher home loan standards won’t impact the economy, but not every economist agrees
While home loan standards are getting tougher and tougher – the RBA doesn’t believe this will impact the economy, though some would disagree.
In this article on Business Insider 6 economists give their view on the matter.
In what was an otherwise fairly bland June monetary policy statement from the Reserve Bank of Australia (RBA), the one major talking point was the bank’s commentary on Australia’s housing market.
Funnily enough, it wasn’t actually about prices, a major area of discussion in Australia at present, but rather what it said in relation to mortgage rates.
Here’s the line in question:
While there may be some further tightening of lending standards, the average mortgage interest rate on outstanding loans is continuing to decline.
Based on my Twitter timeline, no one is really sure on what to make of it, other than the likelihood that lending standards could be tightened further by APRA, especially with recent revelations at Australia’s Banking Royal Commission.
And, as seen in this tweet below from Stephen Koukoulas, Managing Director at Market Economics, it’s not even clear whether average mortgage interest rate on outstanding loans are really declining at present.
It’s all a bit uncertain as to what the RBA is saying.
Rather than speculating about what we think it means, we’ll let the experts have a go.
Here’s what economists have been saying about the inclusion of the line in the June statement.
Bill Evans, Westpac
The statement notes a slowdown in investor housing credit over the past year, retains a line that “APRA’s supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets” and adds that “while there may be some further tightening of lending standards, the average mortgage interest rate on outstanding loans is continuing to decline.”
Together this is a strong indication that, to the extent that we are seeing an additional tightening in lending standards weigh on housing markets, the Bank views this as part of an important ‘de-risking’ exercise that is likely to have few material spillover effects to the wider economy.
That looks to be an optimistic assessment in our view.
Firstly, rates and conditions on the ‘marginal’ loan are more important for market conditions.
Secondly, the slight decline in the average mortgage rate ignores a likely rise in average repayments as borrowers shift from ‘interest only’ to ‘principal and interest’ loans. And thirdly, the discussion completely ignores potential negative spillovers via confidence and wealth effects.
Paul Dales, Capital Economics
By stating “while there may be some further tightening of lending standards, the average mortgage interest rate on outstanding loans is continuing to decline” the RBA implied that the impact on the economy of any fall, or smaller rise, in the quantity of credit will be offset by a boost from a fall in the price of credit as existing mortgage holders refinance to lower rates. So the RBA doesn’t think the Royal Commission will influence the economy much.
There’s no way of knowing for sure what’s going to happen to credit conditions. But we are more worried about the risk that tighter conditions cause credit growth to slow which, by weakening the housing market, consumption and investment, could crimp GDP growth and keep inflation low.
Shane Oliver, AMP Capital
The RBA does not appear to be too fussed by the further fall in Sydney and Melbourne property prices or the further tightening in lending standards now underway.
It’s doubtful, though, that the further tightening in lending standards will be offset by a continuing decline in “the average mortgage interest rate on outstanding loans” as the RBA seems to be implying, as the latter is simply occurring as new borrowers have lower rates than borrowers from say five years ago whereas the tightening in lending standards around income and expenses will act to slow the number of new borrowers who can get into the housing market.
David Plank, ANZ
We think the Bank has tried to soften the implications of this by noting that “the average mortgage interest rate on outstanding loans is continuing to decline.” In our view the recent housing data clearly shows that the impact of credit tightening is dominating what is only a modest decline in interest rates.
Kristina Clifton, CBA
The RBA have acknowledged the potential for tighter lending standards but at the same time note that “the average mortgage interest rate on outstanding loans is continuing to decline.” Tighter lending standards may have a dampening effect on house prices going forward with borrowers not allowed to borrow as much as before.
Ivan Colhoun, NAB
Speculation of a further tightening of lending standards has been a hot topic among market participants of late, with some suggesting a sharp further slowing in home lending is in prospect, which in turn will lead to lower house prices.
The remark suggests the RBA, as one would expect, is monitoring the issue but, at this stage, does not appear especially concerned and appears to be expecting that lower interest rates will provide some offset to any further tightening in lending standards.
The Bank would, in time, assess the degree to which any further tightening in standards affects its outlook for growth and progress in reducing unemployment, lifting wages and returning inflation to the midpoint of the target band.
Sally Auld, JP Morgan
The commentary was tweaked a little to reflect a slowing in housing credit growth, especially to investors, and the fact that although lending standards have tightened, the average mortgage interest rate on outstanding loans continues to decline.
So while growth in the quantity of lending might be slowing, the price of credit is not rising.
Read the full article here
Australia’s golden triangle of opportunity
Is the sunny state a golden property opportunity?
In this article for Switzer, John McGrath looks at the potential in Queensland.
It was great to be back on the Gold Coast for the 21st annual Australasian Real Estate Conference (AREC), attended by over 4,000 of Australia’s best industry professionals.
While I was there I was once again reminded of how much potential the South-East Queensland property market is offering both sea changers and investors at this stage in its market cycle.
In my view, Brisbane is the best market in Australia currently for short to medium term price growth, with the value gap between it and the other big East Coast capitals as large as I’ve seen it in many years.
When you factor in the key drivers for future growth – liveability, affordability, scale and future economic prospects, they all suggest that Brisbane is a market to invest in.
Check out the latest statistics from CoreLogic below.
Value gap – median house prices
Value gap – median apartment prices
I’ve been bullish on Brisbane for many years and in hindsight, I called its next growth phase a couple of years too early.
It’s had some growth in recent years but there is a lot more to come over the next few years.
According to McGrath’s top prestige agent in Brisbane, Alex Jordan, one of the dominant trends today is downsizers buying up luxury apartments.
Alex says: “Despite the reported oversupply in Brisbane’s inner city apartment market, we are seeing great strength in the prestige apartment sector.
“The luxury apartment market ($1M+) is driven by owner occupiers, particularly baby boomers and empty nesters, who are attracted to less maintenance and better accessibility.
“Popular suburbs include New Farm, Newstead, Teneriffe, Kangaroo Point, South Brisbane, St Lucia, Paddington and the Brisbane CBD.
These areas offer a desirable lifestyle with an abundance of shopping, dining and entertaining precincts at their doorstep.”
South East Queensland has so many options for asset-rich, cash-poor southerners.
Many of our customers in Sydney and Melbourne are looking closely at South East Queensland both for investment and a potential sea change.
I believe its affordability will continue to attract record levels of interstate migration.
If you live in Sydney or Melbourne and you’re struggling with the mortgage and cost of living, Brisbane is a fantastic alternative.
It offers big city job opportunities, high quality education options and the chance to transform your financial future.
The boom delivered Sydney and Melbourne home owners a capital gain of up to 75% – that’s enormous new equity that could be cashed in to fund an amazing new lifestyle with far less mortgage stress up north.
Plus, you’d be buying in just before Brisbane’s next wave of price growth.
It’s the perfect scenario.
I believe the area from the Gold Coast to Toowoomba and up to the Sunshine Coast is Australia’s golden triangle right now.
Toowoomba, with its expanded airport facilities which have opened up easy access to the south, is the perfect and affordable treechange destination.
Known as Queensland’s Garden City, about 2,300 people moved here from Brisbane last year for its cheaper house prices and enjoyable regional city lifestyle.
Both the Gold Coast and Sunshine Coast are also appealing sea change options benefitting from a raft of new infrastructure that will drive further population growth and generate more local jobs.
Brisbane is one of the world’s great cities but I don’t think this is fully realised as yet.
If you haven’t been to Brisbane for a number of years, get on a plane.
This is a thriving city that offers many of the lifestyle amenities you love about the southern capitals but at a much cheaper price.
Read the full article here
The Most Obvious Sign Of Intelligence
Do you consider yourself intelligent? How can you know for sure?
According to spring.org.uk there is one obvious sign.
Brain scans measured the total surface area of the cortex and its thickness.
Taller people are more intelligent, on average, new research finds.
The reason is that taller people have proportionally larger heads.
A larger head generally gives people higher cognitive ability.
Of course shorter people with smaller heads can also be highly intelligent, however they are slightly rarer.
Dr Eero Vuoksimaa, the study’s first author, said:
“Even though taller individuals have, on average, bigger brain compared to shorter people, the size of any given individual’s brain cannot be determined by their stature alone.
Further, cognitive ability is not simply determined by brain size.
The findings do, however, shed light on the biological mechanism underlying the association between height and cognition.”
The study used brain scans to measure both the total surface area of the cortex and its thickness.
Participants were 534 middle-aged men, around half of whom were identical and non-identical twins.
The results showed that taller people had greater surface area of their cortex, but not a thicker cortex.
Dr Vuoksimaa said:
“These observations are in line with recent MRI studies of cortical development suggesting that cortical surface area increases until approximately the age of 12, whereas thinning of cortex occurs across the childhood and adolescence.”
Read the full article here
Weekend video: Queen Elizabeth | Transformation From 1 to 91 Years Old
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