But based on the recent numbers from the 2011 census, it looks like the glory days of the Australian housing sector are over.
Two events over the past four weeks sum up the desperation in the Australian housing lobby. The government funded National Housing Supply Council (NHSC) tried to talk up the so-called Australian housing shortage.
It was a brave attempt, but just over a week later, their case was shot down. Here’s how Bloomberg News reported the NHSC update:
‘The revised national estimate of the housing shortfall at end-June 2010 is 200,000 dwellings, 13,000 greater than previously published.’
It was a gutsy move to revise the housing shortage numbers just two weeks before the release of the 2011 Census numbers. Too gutsy. We bet they wish they had waited.
What Australian Housing Shortage?
Reporting on the Census statistics, a Bloomberg News article revealed what we’ve said for four years — the Australian housing shortage doesn’t exist…
‘Australia has almost 1 million fewer households than assumed in government forecasts of a housing shortage, raising doubts about a supply shortfall cited as the main reason the nation will avoid a U.S.-style crash.’
The article continued:
‘The Pacific nation had 7.8 million households, data released yesterday from the 2011 Census showed. That compared with estimates of 8.7 million as of June 2010, according to the latest figures used by the National Housing Supply Council, a group created by the government in May 2008 to monitor housing demand, supply and affordability. Australia’s population also grew by 300,000 less than previously estimated, to 21.5 million.’
There are 300,000 fewer people in Australia than previously thought. That’s a big difference. In fact, it’s a huge difference. It’s roughly equal to one year’s immigration numbers.
Put another way, one whole year of new arrivals (a big argument used by the spruikers for an Australian housing shortage) didn’t happen!
As for household estimates, the NHSC estimated Australia had 8.7 million households. It turns out there are only 7.8 million. Chairman of the NHSC, Owen Donald told Bloomberg News:
‘On the face of it, 900,000 is a gigantic difference. We need to get to the bottom of what’s in the statistics bureau numbers.’
The entire Australian banking sector is built on a fallacy. The banks built the housing bubble on the false belief that the Australian population was soaring. The government even appointed a Population Minister!
Turns out there wasn’t and isn’t a population crisis. There are 900,000 fewer Australian households and 300,000 fewer people than previously thought. What a miss!
An Australian Housing Boom, Bust and Recovery
So now there’s no denying it, Australia has a gigantic asset and credit bubble, and the property spruikers can’t even use the excuse of high immigration to back their case.
You’ve seen the Australian housing and banking boom. Now get ready for the Australian housing and banking bust…the next part of the business cycle.
We’ve campaigned long and hard over the past four years, arguing that a Australian housing shortage never existed in reality. We were right. Those who called us mad are welcome to send their apologies to email@example.com.
As we said at the top of this letter, credit and moneylending are vital to an economy. They enable the transfer of capital from those who don’t have a current need for their money (savers) to those who do have a current need but don’t have the capital (borrowers).
So, used in the right way (without artificially low interest rates), credit can boost an economy and help create innovation and progress. But used in the wrong way, it creates asset bubbles…and that creates problems.
Bottom line, the problem isn’t credit per se, but rather the central bankers and politicians who abuse it.
PS. In the latest issue of Australian Small-Cap Investigator, we took a closer look at the Aussie lending market and discovered a company that not only has a sensible risk-weighted approach to setting interest rates, but is also an innovator in the market. To find out more about this company, click here to take out an obligation-free trial to Australian Small-Cap Investigator.
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Written by Kris Sayce
Kris Sayce is Editor in Chief of Australia’s biggest circulation daily financial email — Money Morning. (You can subscribe to Money Morning for free here).
Kris is also editor of Australian Small-Cap Investigator, his small-cap stock research service, where he provides detailed analysis on some the brightest, smallest listed companies on the ASX.
If you’re already a subscriber to these publications, or want to follow his financial world view more closely, then we recommend you join Kris on Google+. It’s where he shares investment insight, commentary and ideas that he can’t always fit into his regular Money Morning essays.