Australia's property bubble

There is a huge and angsty debate in Australia at the moment about whether the country is in the grip of a property bubble or not. One of the most prominent real estate bears in the local blogosphere is walking to the top of Australia's highest mountain next month, as punishment for losing a bet with a more bullish counterpart about the direction of the property market. Most mainstream commentators (such as the great Ross Gittins) seem to think the current boom is sustainable and reflects the fundamentals.

I don't have nearly enough expertise and knowledge to challenge that position yet, but there seem to me to be an awful lot of very clear warning signs that something is awry in the market:

• Loan multiples are at truly scary levels. I can remember the anxious headlines in the UK in 2006 and 2007 when Abbey started lending out five times the principal borrower's income. In Australia at the moment, the most cursory mortgage search turns up a host of lenders offering seven times joint income, ie up to 14 times principal borrower's income. And this is in a country whose GDP growth, inflation and interest rates are traditionally substantially higher than in the UK, so that over-extended borrowers will be much more vulnerable when interest rates return to more normal levels, let alone if they overshoot.


• The range of mortgage products on offer looks like UK circa 2007, or Florida circa 2006. Commentators routinely state that "Australian lenders don't make subprime loans". They do, however, have lots of self-certified loans, where you don't have to prove your income and pay a higher interest rate as a result; non-conforming loans, where the borrower's credit history is patchy and again commands a higher rate of interest; and they do often combine these products with low introductory rates which disguise the real cost of borrowing. Whether Australian lenders name these products subprime loans or not, they have exactly the same features that made subprime loans so risky.


• The attitude of consumers is distinctly frothy. I was in a bookshop the other day and had a look at the real estate titles in the personal finance section. With the exception of a lone book from the "For Dummies" series, literally none of the titles were plain guides aimed at explaining the complexities and pitfalls of the real estate market to ordinary homeowners. They were all "How to become a property millionaire in six months" or "Secrets of real estate tycoons" - ie property investment guides, not property buying guides. The imbalance is what stands out: if the "investment" view is so much stronger than the "place to live" view, then people are likely prepared to take on bigger risks (such as a 14x income mortgage) because they're convinced rising prices are a one-way bet and will bail them out of whatever debt they take on.


• The normal arguments trotted out by the bulls seem, to me, to be based on classic bubble logic: that we haven't had a property crash in years so we must have somehow escaped that cycle; that *current* homeloan default rates on mortgages are fairly low (as they were in America in 2006); that demand from population growth is outstripping supply (as it has in Britain for the past two years). And they seem to utterly ignore the importance of mortgage finance in all of this, ie that if lenders start raising their credit standards, as they did in Britain in 2008, prices will not be able to maintain their level. To me it's quite telling that decent information on mortgage credit standards is extremely hard to come by, and not closely watched.

This doesn't mean that the whole thing will collapse tomorrow. Unlike the UK, for instance, Sydney has already experienced a real estate slump from 2003-2007, so the current hot market is in some ways just making up for lost time. But price-to-income ratios are still among the highest in the developed world, and it's genuinely quite scary to see the sorts of loose lending practices that proliferated in the UK and US before the crash being embraced wholeheartedly in Australia, with very little concern about where this will lead.

Of course, we have a vested interest in prices coming down, at least to London levels. The nicely-done up two-bed house next door (in a suburb pretty much like our old neighbourhood of Hornsey, and in a city where the median income is about $37,000) just sold pre-auction after about a fortnight on the market for $820,000. Our incomes (well - Kate's current income and my expected income) are much higher compared to median incomes than they were in London, but the level of indebtedness that most people seem prepared to take on here means that at the moment we could easily be outbid by someone earning half as much.

That makes one think that maybe it's time to just bite the bullet and pay more than you would normally think you could afford. And of course, it's the moment that the arch-sceptics like us start thinking like that, that asset price bubbles tend to burst.

The Quickening

OK so it sounds like the title of a really bad horror film (in fact, I've just discovered that it is), but it's still a great term. It's that feeling that mothers get about four months into pregnancy of their baby starting to move around, and Kate's been experiencing it for the past week or so.

At first it was hard to read what this was. Pregnancy does hellish things to a woman's guts anyway, so amidst all the heartburn and indigestion and what have you it's hard to pick out the significance of turbulence from a baby foot stirring up the amniotics. In the early days Kate was pretty convinced that it was probably just a bit of banana smoothie that was stubbornly refusing to digest properly, but now she gets a little flutter several times a day, and it's consistent enough that it can't just be reflux. She says it feels like bubbles fizzing away in her stomach at the moment.

This is particularly wonderful because it's like a constant daily reminder that the pregnancy is progressing well - and also that the baby is inheriting its parents' fidgety tendencies.

From the desk of Mr Jasper: latest infamy!

I am reasonably happy with the living conditions in my new house. But I have uncovered a fresh plot directed against me - I believe the humans are trying to poison me.

That seems the only reasonable explanation for what happened to me earlier this week. On Monday night the female human got back from her trip to Queensland and we had what was in most respects a pleasant and civilised evening: they sat on the sofa talking and eating, I found a cockroach in the kitchen and pranced around playing with it. I have to say, as playthings they are perhaps even better than mice and baby birds; their stamina makes them worthy adversaries.

But after they went to bed I was racked with an unfamiliar pain. I started feeling tired and sickly and hot, so I took a quick nap in the hallway where the wall is cool. When I woke up there was some disgusting discharge weeping out of my eyes. I was so horrified that I went back to sleep again.

When I next awoke it was light and I was still feeling groggy. The female human was leaning over and peering at me, talking in a worried voice, and the male human came and had a look too. I tried to get up but was feeling a bit sore about the stomach, and I didn't really feel like eating. The female was saying something about how it was very unusual for me not to wake them up at 4am by sitting on their heads and that I would normally be crazed with hunger by this time in the morning. The male one made a telephone call and then went out; when he came back a few minutes later I heard him banging around in the back of the house, and no sooner had I realised what was going on than he swept me up and put me in that infernal cage that always comes out when bad things happen. I was feeling too weak to protest.

They carried me out to a car and drove me to a big building where a disgraceful woman squeezed my stomach until I growled and stuck a thermometer up my bottom. She then had a brief conversation with the humans, and before I knew what was going on another human came and snatched me up, put me in a cage, shaved a bit off my front leg and stuck a needle in me. The whole process was extremely distressing but I was so tired I fell asleep.

When I woke up the disgraceful woman was on the telephone, I think to my humans, telling them that I'd had an infection in my pancreas but that it wasn't serious, that I was looking a lot better, and that I could go home the next day. She was right about being better; I cleaned myself up a bit, had some food and drink and had a bit of a sniff of one of the humans, who said I was being smoochy.

The next morning, the male human came to collect me and took me home as if nothing had happened. All in all, a bizarre experience: I now have a very asymmetric haircut and I've heard the humans going on about the money they spent putting me in hospital. That makes me feel content: the best proof of love is food, but dollars come a close second.

Home sweet home

Kate and I have just eaten dinner sitting out on this bit of decking in the light of a mild Sydney autumn evening. Nothing special about the meal, but the feeling of being in our own place is blissful after so long living out of suitcases (even in North Bondi, we didn't have most of our belongings with us).

A few weeks ago we went to see the film Up In the Air. George Clooney's protagonist is pathologically obsessed with cutting off anything that could tie him down, and to this end he has a job which involves flying round the country with minimal baggage to sack workers whose bosses are too cowardly to let them go in person. He sidelines as a motivational speaker, where his catchphrase is "What's in your backpack?" As in, all the emotional and material things you carry around with you, metaphorically or otherwise, are holding you back. Needless to say, the film is in part about him rejecting his own philosophy.

Anyway, that's a long-winded way of saying that it's great now to have all our own STUFF again. Much as I can appreciate the principle of stripping life down to its bare essentials - I travelled round China for two months with nothing more than a shoulder bag, after all - I'm very happy now that I can go to my bookshelf and find that Upton Sinclair book I was thinking of. Ditto, that we can make banana smoothies in the morning when Kate is craving banananess. Ditto, having a printer/scanner rather than spending ages and $$$ in internet cafes every time I have to send off some form.

That's all the practical stuff. But the best thing of all is that feeling you get, when living in your own house, from making a cup of tea in the late night quiet; switching off all the lights; and climbing into bed with someone you love.

Farewell to Bondi

We've been living in our new gaff for a couple of weeks now and we're loving it. Best of all is having our own back garden and no psychotic and aggressive neighbours. In fact the neighbours in Petersham are great - it's one of the first streets I've lived on in a while where I genuinely felt part of a community, rather than a mass of transients.

But I'll certainly miss plenty about living near the beach - first of all, the name of this blog doesn't sound quite so appropriate any more. There is definitely a totally different quality about life on the edge of a continent - with the smell of the sea on the air when the wind is in the right direction - to life in one of Sydney's endless suburbs. When we first moved to Oz, my friend Paul got me to do a quick segment on BBC radio about the attractions of living in Sydney, and one of the main points that came to mind was the humbling, taking-you-outside-yourself quality of living so close to something so elemental and so powerful.

I felt a little bit of that when I first started working next to the Thames in London: watching the river's moods, the contained but brutal force of its currents swirling round the piers of its bridges. Stop for a moment to think about it, and there is something frankly terrifying about the way the strip of mud on which beachcombers sway their metal detectors in the morning has disappeared below 20ft of swirling khaki water by sunset.

But if the Thames gives you a sense of nature's awesome power, it's nothing next to the sea (and not just any sea: a sea you can run down to and swim in, dive into, or even surf on). The first time I swam there after arriving here, with Kate, Dorani, Dorani's friend Diamando and her daughter, we all went body-surfing on a sunny afternoon in early summer. It wasn't awesome body-surfing, but it was enough that if you caught a wave just right it would take you all the 20 metres in to the shore. And with your legs hanging buoyant in the water, you could pick up the force of the sea swirling around you, as if you were a human seismograph. Somewhere further out there, or on the same beach on a rougher day, that same sea could be moving with enough strength to kill someone.

Anyway, I think that's what I will miss most and most want to return to, if we can ever afford it. Kate much prefers the people around here - fewer trustafarians with Tango Tans, a less self-centred culture generally, less chance of ending your life stuck in the grille of a Toyota Landcruiser - and I'd agree with all that. But there is something quite unique about living near the sea, and I'd love to do it again. When a big storm comes in, you can watch it darken the surface of the water as it rushes towards you; in autumn, whales often play close enough to shore that you feel you could almost touch them.

The family just got bigger

Well we can finally reveal something that we've been keeping close to our chests for the past few months: Kate is 15 weeks pregnant.

If you've been wondering why this blog so far had much more in the way of musings on life/universe/everything than actual details of our life what you might all want to read, it's because most such details over the past few months have involved coping with morning sickness, getting up early for visits to the prenatal clinic, and other such things that we didn't want to post publicly until we were pretty confident that the pregnancy was going well.

Anyway, our last visit to the ultrasound clinic was great, as you can see from the scans: yes, there's fingers, legs, a brain, and luckily it looks so far that the bub has got Kate's nose rather than mine.



Kate has spent much of the day sorting her clothes into things-she-can-wear-now, hand-me-downs-that-will-prove-useful-in-a-couple-of-months, and not-for-a-good-while-after-the-birth. On the plus side, the morning sickness, which at one point was so bad that she couldn't even drink tea, has now receded enough that we had garlic in our gnocchi tonight.

Recipe time: apricot and vanilla compote

This one is in honour of Janine, who took us in when we were driven out of our house and even put up with the temporary residence of our cat, who loves compote on her muesli and who asked for the recipe. It's actually a rip-off of a Claudia Roden recipe and I think the provenance is Turkish - the Turks are absolute experts at puddings so that would make sense.

Before I first made this, I used to find fresh apricots a bit of a waste of effort. Eddie Izzard used to do a routine about how pears are underripe for days and days and days, taunting you with their hardness, then ripe for about 12 hours before becoming immediately overripe and horrible. I find apricots similar, but if anything even more capricious, with an edibility window that seems to be about five minutes. Cooking them is the way around this.

1. Get a bunch of apricots, halve them, and cut out the stone and any stoney stalkey bits. Layer them on the bottom of a frying pan, cut side up.

2. Get some caster sugar and sprinkle it on top. I used about one dessertspoon-full for every three apricots - it doesn't need a lot of sugar because there's so much in the apricots.

3. Get the seeds out of a vanilla pod by slicing it lengthwise and dot as much as you can on the apricots.

4. Put some water on them. They don't need much as, again, there's lots in the apricots. Enough to get halfway up the apricots is more than enough.

5. Put it on to boil on a low simmer. Once the water is boiling a bit, gently turn the apricots to get the sugar and vanilla mixed with the water. Keep it simmering until the apricots get to that nice compotey texture - their firm shape completely lost, but still holding together as discrete half-apricots.

6. Lift the apricots out and into a bowl with a slotted spoon or some such, keeping the syrup in the pan; you'll probably need to drain a bit more syrup back after doing this, as they'll exude syrup once they're out of the pan.

7. Turn the heat right up and let the syrup boil and foam fiercely, not letting it fully caramelise but keeping it on the boil until it's got a nice jammy texture, and the spoon leaves a few seconds' track when you drag it across the bottom.

8. Add this reduced mixture to the strained apricots, stir it together and chillax.

9. A good side for this is ricotta cheese, beaten up with icing sugar and ground cinnamon until it's just slightly sweet. Not too sweet, as the compote is sweet enough.