The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Thursday, July 15, 2010

Bernard Keane nails housing today in Crikey

A fantastic article today by Bernard Keane in Crikey today that surgically hits all the key housing issues. Here are some highlights:

"While yesterday's revised economic forecasts showed stronger commodity prices driving higher tax revenue -- a change in forecast that apparently meant Wayne Swan should have been begging the forgiveness of the Press Gallery, which has a perfect record of prediction -- they also predicted a softer domestic economy.

One of the key contributors was a significant downgrading of forecasts for growth in investment in housing, which for 2010-11 was reduced from 7.5% growth to 5.5%. Estimates for growth in the year just completed were downgraded from 3% to 1%...

This has real implications for whether Australia can start to close the gap between supply and demand for housing that has opened up over the last decade...

the most serious issues remains the lack of finance for the residential property sector, driven by the big banks exploiting the GFC-induced collapse in the non-bank lending sector to grow their exposure to the residential mortgage sector, slashing higher-risk lending to businesses and, in particular, property developers.

[Harley] Dale says the lack of finance is hurting not just large property development companies, but small and medium developers who don't have the option of accessing equity finance. The banks' focus on mortgage lending means "they're stimulating demand for housing but restricting finance that will enable supply to meet it."

...This is an issue that will only be addressed once we start returning to something like the levels of competition in the residential mortgage sector that we saw prior to the GFC...The more non-Big 4 mortgage lending, the more pressure there will be in the big banks to stop clinging to low-risk mortgage lending and revive business lending.

Having banks that concentrate on the Australian market, which is the source of their de facto government guarantee, rather than chasing high-risk foreign ventures, would be handy as well, but that's another story.

The longer-term implications of the lack of lending for property development go directly to Australia's ability to start narrowing the gap between housing demand and supply."