Levels of Household Debt

There's an interesting article by Jonathan Chancellor about how the level of household debt in Australia has risen from 50% of household disposable income in 1980 to 150% now. One wonders to what extent this is just a shift in our outlook on life, with people now comfortable to borrow freely.
A good sign is that the number of repossession actions lodged in the NSW Supreme Court is well down on the last few years.
Deutsche Bank feels that concerns about Australian house prices are ebbing, suggesting a steady moderation in price pressures.

"Prices up, vendors selling at a loss"

That eye-catching headline is from today's Sydney Morning Herald. The article by Jonathan Chancellor gives examples of recent sales where properties have gone for well below the earlier purchase price. One such property sold for $1.25M after being bought in 2007 for $1,635,500, a 23% price fall over the last three years. The successful selling agent explains that this was because the original purchaser overpaid when he bought it. I wonder how many recent first-home-buyers are wondering about their futures.

From the same edition of the SMH, this article by Simon Johanson discusses the nature of growing Sydney house prices under the headline "Property apocalyptics predict bubble trouble", and talks around the prospect for a collapse. Simon makes the point I mentioned in my last blog, that "no one wants a sharp plunge in house prices". Any politician putting forward plans deliberately to drive prices down could find very few supporters. But then, nobody wanted the collapse that hit America two years ago.

Home Affordability

In SMH's daily "Decision 2010" columns there is an article on home affordability.
It makes the point how Kevin Rudd's doubling of the first home owner grant boosted house prices, with the average loan during Rudd's truncated time in office rising from $230,000 to $290,000. The problem with this, of course, is that now the grant boost has been removed, those house prices must slip back, leaving new home buyers stressed by increasing interest rates and facing negative equity.
No matter, Tanya Plibersek says, the grant kept builders in work. But if that was the only objective, the grant should have been restricted to new construction, and not used just to boost the prices of existing homes.
The report makes the point that "about 70% of Australia's 9 million or so dwellings are owner occupied, so increased housing affordability is not really the priority of the majority". Indeed most home owners would be very upset by any plan which proposed very swiftly to reduce house prices, if it involved them getting less money when they sell their homes. 70% of voters would say "by all means cut sales and land taxes, but don't threaten the sale value of my asset!"

RTA backs down on Motorway Extension

According to the SMH today, the Roads and Traffic Authority "has been forced to back away from a plan to build a four-lane extension of the M5 motorway through Sydney's inner west, after state and federal ministers indicated they would not support the project".

The NSW state Roads Minister David Borger said the government had heeded the community's call: "I queried the benefits of proposals that appeared to carve through suburbs for the sake of route convenience instead of securing new more direct routes to hubs of economic activity like the airport and the port."

That observation puts one in mind of the ten lane carriageway the RTA is planning to drive through Chilworth Reserve in Beecroft, and the proposed tunnel under Pennant Hills Road joining the eastern end of the M7 to the southern end of the F3, both for the sake of route convenience. What Sydney clearly needs is a direct route road built to conduct traffic from the NW corner of the M7 directly onto the F3 further north, taking all the interstate traffic completely away from Sydney. It seems inevitable that such a road will be built eventually, so why spend all this money on short term paliatives, the building of which involve huge inconvenience and disruption to the local residents?

One piece of good news is that the M5 expansion had been shortlisted as a "nationally significant priority project" yet has been varied by public pressure. The M2 widening project was also listed, by Kristina Keneally in her previous position in the State government, but clearly politicians will respond if the people protest enough.

Back in May Kristina "personally deleted" the proposed extension of the F6 motorway from the government's transport plan, because the state doesn't have the money." (Sub-text - the State government seems to have fluffed several submissions to Federal government for funding, so money we should have received went to the other states.)

The reason the M2 widening project is still going ahead is because State is granting Transurban a licence to do the work at their cost, in return for being allowed to charge increased tolls for an extended period. Let's hope Transurban doesn't run out of money half way through the construction phase!