Hey Sydney, how do you spell B-U-B-B-L-E?

Here is the latest RPData Sydney house price chart:

sydney bubble

And who is driving it? Is it first home buyers trying to get in? Lol:


Who is it then?


Bingo, speculators. Walks like a duck, quacks like a duck, is a …

Houses and Holes
Latest posts by Houses and Holes (see all)


  1. Nope! I’d say it’s a realistic response to policy. Make the cost of borrowing for a house basically zero. Bring in 250K extra population per year that you park in Sydney and Melbourne. Why would anyone expect anything other than a chart that looks like that?

      • Yeah I know. Agree. Nevertheless, given that it is RBA and Govt policy, and if China loosens the capital controls, it’s hard to see an end any time soon?

      • “Still a bubble. US bubble blew up for same reason.”

        Our bubble is much bigger. And we are different from the US in that most of our relatively small population lives in a couple of big cities whereas the US has hundreds or even thousands of cities. But nothing is being done here to motivate people to move to our rural areas, except perhaps, cheaper house prices, which isn’t much use if there isn’t a job there.

        Also we have a government who will do anything to support this bubble. Our government rewards speculators making losses on property and betting on price appreciation. Not to say that the US doesn’t have its own problems, but we are different.

      • Relax bruvs. Our banks are huge and can easily take a hit.

        Too big to fail is so 2008 – our banks are TOO AWESOME TO FAIL!

      • @md below

        You are spot on.

        Why on earth move to a dying regional area, unless you have skills in health, nursing, or agriculture, or, hospitality.

        I am a telco engineer with a lot of experience, and moved from Melb to northern NSW. (We moved for health and lifestyle reasons.)

        There are NO jobs in my area.

        And companies like the NBN and Telstra, despite words to the contrary, don’t support teleworking.

        That’s, for example, a 6 figure wage not being earnt, with taxes being paid, and money going into local services.

        Until the gov’t at all levels takes the lead and moves gov’t departments–en masse–to regional areas, the concentration of folks in the city will continue. (This is not a good thing.)

      • Yes, tmarsh, I think it would be too hard for the government to encourage people to move to the country towns, and they can’t be bothered anyway when there is a Ponzi scheme to maintain in the cities. As prices grow higher they have to make sure that prices will go even higher and that can only happen with more and more people. There seems to be no shortage of people wanting to move to the big cities, and certainly no shortage of foreign investors wanting to plough money into real estate in the cities, so therefore, no problem to attend to.

        I wish there was more of a backlash from those priced out of the cities, but really, it’s only a whisper. Maybe when the younger generations grow up and realise their futures have been sold out to foreigners and local investors pushing for ever-increasing housing prices, they might make a noise then. But that’s years off.

        Same deal with relocating government depts to rural areas. At the moment we’re like boiling frogs. Every week thousands of people pour into our major cities. We notice more congestion on the roads etc. but from week to week, it’s not a huge change and we just put up with it and try to work around it. So the government does nothing. It will only be when there are millions more people and we are literally bursting at the seams that they might actually do something about it.

    • I have to agree with Flawse on this, I am an immigrant so clearly part of the problem, unfortunately I am not a cashed up immigrant so I am still renting but the pent up demand for housing is huge in Sydney/Melbourne because of us.

      But the difference with the US is that I don’t think the lending criteria here has gone so bad/low here as it was the US case.

      I can’t see widespread problems caused by junk or sub-prime lending being the problem here.

      If this bubble is going to burst will only be because of the end of the mining boom/unemployment going high.

      Otherwise it won’t happen.

      • Thanks foreigner. A little buit further reasoning.
        Both HnH and I watch the external account and that must be where the shock would come from. So if the Fed doesn’t taper…no problem there will be enough dollars for everyone till it ceases to have value.
        If the Chinese loosen capital controls we can expect a fair bit of that loose change to end up here so again that cancels out the problem of funding the external account.

        Hence my INCLINATION to think this thing is all GO! BOOM!

    • Jumping jack flash

      It needs to happen. Who else is going to pay the boomers their super and buy their houses for their self funded retirements?

      Australians? We have already had our fill of debt while the FHOG/B was running and many won’t be ready for another drink for 20 to 30 years, which will be too late.

    • ‘Basically zero’? haha. Have you compared with US interest rates? How much is a deposit for a FHB without another property as security? How much is unearned state govt stamp duty on ever increasing property prices? Not sure how 6% of $500,000 p.a. comes to zero, without touching principal repayments.

      Note the banks’ cost of borrowing only ties slightly to the RBA’s OCR interest rate, as at least half of the credit comes from dubious overseas sources, which has doubled the pool of credit available to borrowers in this country, hence doubled house prices.

      The only brakes possibly might be from APRA or Basel II/III, which don’t seem to be being applied, or can be got around.

      So there’s not a lot to do with ‘policy’, especially the RBA’s single lever interest rate setting. The only policy possible is to virtually nationalise housing or control land prices by fiat — both of which would be very healthy initiatives, but screams of communism and totalitarianism would echo through the halls of the property owner vested interests.

      Note also a lot of the Sydney pricing probably comes from Harry Triguboff selling to offshore buyers like cashed-up Chinese nationals seeking to expatriate their money from running factories or skimming money in the case of CP officials out of China. That is pure cash, no borrowing required.

  2. It happened in Ireland, but no one wanted to live in Ireland, except about a million Polish.

    Sydney is all style with no substance imo. Unless you’re an eastern suburbs trust fund kiddie, or you’ve got a tradie business making a k or two a day you’re up for a hard life. Maybe it’s just me but surely this will become apparent when things start turning for the worse. Although good looks can allow a woman to have a lot of power for 20 years or so, and the Sydney bubble has been running for about 15 now.

  3. There’s a word that is long forgotten in Australia but will soon come back into circulation:


    • I think there will be a new word before that one. Ruptbankcy.

      Ruptbankcy is the legal status of a bank unable to provide it’s depositors with cash from their savings because they pissed them up against the wall.

  4. The Kouk predicted 10% growth in Sydney and he was laughed at here – turns out that he was correct.

    It’s only a bubble if it busts, and this won’t bust. The price rise in Sydney is here to stay.

    • “It’s only a bubble if it busts”

      I don’t even know where to start with what’s wrong with that statement.

      • The usual method is to either pretend that it doesn’t exist or pretend that it will soon go away.

        Assuming a bubble is a choice of the latter strategy – it won’t work but give it a shot if you must.

      • In Peter’s defence I have been hearing about a Sydney real estate bubble since the 1980s. It still hasn’t burst in any significant way.

        Now perhaps that’s been dumb luck and good fortune (credit boom followed by mining boom) but I reckon its incumbent on those saying its a bubble to provide some very strong evidence.

      • There’s ample evidence – see Phillip Soos’ work among others. That it hasn’t burst is irrelevant.

        In fact, it only ceases to be a bubble when it bursts.

      • “In fact, it only ceases to be a bubble when it bursts.”

        So you agree then.

        Phillip Soos is a reverse engineer.

        Look at the reasons why the bubbles burst in the USA, Ireland and Spain and ask yourself if those conditions exist here – IMHO they don’t, but consider the evidence for yourself.

      • mine-otour in a china shop

        Peter F – the reason the bubble was created in Ireland was that interest rates and mortage lending rates fell sharply, buyers and speculators particularly became irrational, the central bank (ECB in this case) poured petrol on the flames by lowering rates further, banks dropped lending standards considerably under the guise of competition (tracker mortgages), the Government and regulator did little to counterbalance the pressures, and demand rose sharply as inward migration soared with no active population plan.

        It might have been pricked by a banking and developer collapse (which could happen here), but the reasons the bubble was created are remarkably similiar. As you say “ask yourself if the conditions exist here” – the answer in my opinion is yes.

        Which shock might expose it in Australia is another question….

      • PF there is no logic whatsoever to your argument. There is ample evidence to suggest that there is a serious bubble here. You’re going to have to try harder than “it hasn’t burst so it’s not a bubble”.

        They might not be exactly the same conditions as Ireland/Spain/US, but to suggest that they have to be the same is burying your head in the sand.

      • It’s about upside risk versus downside risk.

        As others have noted, the fundamentals have been suggesting Sydney real estate has been overpriced for close on 30 years – and if you’ve been sitting out of the market waiting for the correction all this time then you’re a lot worse off than those who bought back then.

        Hindsight is of course always 20/20.

        As PF has noted – we all ridiculed the Kouk’s 10% prediction in January (and I was one of them), but the facts show that he was far closer to the mark than most.

        Where prices go from here is anyone’s guess, but the market has had reasons to correct for well over a decade and hasn’t done so – which would suggest to me that an imminent price correction is far from guaranteed.

      • > The Chinese capital flood might send this to a whole new level?

        This is why it’s pointless stating that calls of a bubble since the 1980s illustrates that things are like they are in the 1980’s.

        Practically every non-chinese investor in Sydney is banking on their property being bought out in Renmibi.

        We are yet to see what happens when this capital flood reverses direction.

      • I agree with outsidetrader.

        Sydney prices are completely irrational, and yes its a tragedy for first home buyers in that city, but this has been the case for a long time, so that doesn’t mean a crash is imminent.

      • 10% across the nation over the next year or so would not surprise me. I can tell you. from practical on teh ground observation, that both the Sunshine Coast and Gold Coast are both up more than 10% already. It’s just getting started! Another interest rate cut or two and the moon is the limit. A cut or two and some far distant universe, of which we now have no concept, is reachable.
        (Refer to Andy’s post above)
        At zero interest rates everything in the world is worth infinity.

      • @ AB

        Year to date 5 capital cities is up 8.76%. (RPData)

        Are you criticising him for not being exact?

      • 🙂 His (Edit: I’m talking RP Data here but the same argument could apply to teh Kouk) average includes Sydney and is heavily weighted by that. He records other capital cities as having little increase. I think he is wrong. This fire is already raging.
        Friends in Kenmore last week put there house on the market at a price they thought was quite ‘out there’. They were not in any hurry to move. The house sold in two days at the asking price!
        The Sunshine Coast has gone absolutely nuts and there is no doubt the GC market is way above 12 months ago. Note that some price ranges have moved more than others and that is one of the problems with an overall stat.
        Now my sample is small I guess. I don’t know what is happening in Toowoomba Dubbo Rockhampton et al but all I can say is where I’m looking this thing is well alight. It will be further fuelled, as it has been in the past, by the heat coming from the Sydney market.

    • As long as it is speculative investors selling houses to each other at higher prices, I wouldn’t care if it is 10% or 20%.

      Tell me how a market, composed of a majority of speculators, is going to sustain itself? Do I smell a tinge of fear in your rant? 😉

      • My rant Mav?
        If so I’ve been afraid for five decades! NOw the insanity is just mind boggling. My fear is either the whole thing crashes or, alternately, hyper-inflation sets in.
        Choose the poison!

      • No. I was referring to PF.. And I called it a rant because he sidestepped the question posed in the blog post and got busy hand waving Kouk’s Great Prophecy ..

        Bingo, speculators. Walks like a duck, quacks like a duck, is a …

        PF, the Master of Obfuscation 🙂

      • Mav, I agree that Sydney prices are irrational and its all being driven by speculators (walks like a duck etc) but that doesn’t mean its about to burst.

        If I had a dollar for every time I’ve read that Sydney real estate was about to crash I’d have enough to buy a house in Sydney!

      • Lorax, do you see any mention of a crash in the blog post?

        PF brought in a obfuscating definition for a bubble ( “It’s only a bubble if it busts, and this won’t bust” 😀 ) because he didn’t want to answer the question posed.

        Bingo, speculators. Walks like a duck, quacks like a duck, is a … BUBBLE

      • mine-otour in a china shop

        Lorax – if you read it 680,000 times you would be able to afford a small weatherboard shack in need of repair in the Western Suburbs.

        If you read it 1.8million times then the dream 3 bed trophy house in the Eastern Suburbs (deceased estate beating off other speculators).

        Jeez you must have read a lot? Do you live in a Coffee Shop and have a lot of spare time on your hands?

      • I take HnH’s point about ducks – but reading a bubble into 12 months of Sydney house price data is a little premature.

        I’d take a look at what’s happened to Sydney house prices over the last few decades (in real terms).

        It’s hardly been a rapid run up in prices.

      • outsidetrader, how long do you want us to wait for the market dominated by speculators to continue before calling it a bubble? 2 years? 10 years?

      • Some of us remember what happened in 1929, 1971, 1973, 1978, 1987, 2000, 2008, etc.

        I think it would be difficult to put things into perspective without studying history.

      • BB, beat me to it..

        I should add, if they are going to stay incredibly expensive, what is your reasoning behind that, what is going to keep them up there, as by any sane measure, Sydney prices are truly absurd.

      • Not by the measure of a Chinese person who gets no return on his/her cash. The Chinese are wanting to buy REAL assets. if the paper USD junk they hold is worth sfa then anything they can buy at any price is a bargain.
        Again…at zero interest rates everything in the world is worth infinity….and that is where we are headed.

      • @ hamish.

        Given the short supply and high demand in a country with high incomes, low interest rates. and a well funded banking system, the market is quite sane.

      • PF, incomes, whilst they may be high in nominal terms compared to other countries, are very low compared to property prices in Sydney.

        I agree there is a chronic artificially imposed shortage, and the federal govt will back the banks into all sorts of moral hazard, and that might provide a reason for the prices being where they are, but from the perspective of anyone with a regular job and wanting to buy a place to live in, they are a long way from being sane.

      • @ hamish

        Well someone is buying houses in Sydney and clearly they don’t consider that their income is insufficient to afford the price and neither does their bank.

        They either have a greater risk appetite or a higher income. It would be interesting to find out which.

      • PF, Investors, both foreign and local seem to be doing most of the buying going by the info being put up here.

        Banks will lend you into virtual poverty, good friends who are looking to buy at the moment, and have combined gross income of close to $200k, so they are doing rather nicely. They went to bank to get pre-approval, and were totally shocked that the bank was happy to lend them ~$1.3 million, which would leave them with a nice house and an austere lifestyle. They mention the bank was reasonably pushy about borrowing the maximum, they sensibly will only borrow a much lower amount. I really should see how much they will lend me, on my much more modest income.

        They also think Sydney prices are stupid high, and have witnessed first hand asian buyers dominate the inspections, and outbid eveyone at auctions. They are pissed off and disgusted with the whole experience.

  5. Peter is correct.

    I can’t see Sydney busting either. Not when the Governemnet is commited to throwing everything bar the kitchen sink at propping up the housing market.

  6. When Sydney blows – Melbourne will go too. The smart investors in Sydney would already be selling off to the bozo punter.

    But Melbourne…..oh dear…..

    I run through the suburbs of inner-northern Melbourne – Northcote, Fairfield, Alphington, Coburg etc. On almost any block of any street, on either side of the road there is at least one, sometimes more, properties lying vacant. Frequently they park old cars in the drive way. I am seeing signs saying “waning, dangerous, do not enter” on many of them.

    Almost the entire north of Carlton, Fitzroy and Clifton Hill is made of up run down weatherboard dumps which have not seen a reno since construction interspersed with the odd nice renovation and 70’s/80’s italianate villa. The whole region is literally flooded with vacant land, blocks, empty warehouses, empty used car lots, empty shops, disused storage. The idea that there is any density at all is a joke.

    The vacancy statistics are profoundly wrong.

  7. arescarti42MEMBER

    I wonder if Sydney will begin to see an exodus of the non-landed class to other cities in the future.

    A lot of low-middle income households will surely realise that they can live the same lifestyle in the other capitals for a lot less, whilst still earning a similar income.

    What will that do businesses and the bottom end of the labour market in Sydney?

    • Immigrants. Similar to Mexicans in California. The kiwis are too rich to assume those roles anymore.

    • I don’t really see any respite in the other capitals, as they are all really expensive as well. Hobart might be a fair bit cheaper, but employment prospects aren’t all that crash hot either.

      In short, you’re screwed no matter where you turn.

    • A lot of low-middle income households will surely realise that they can live the same lifestyle in the other capitals for a lot less

      In 1990 this was true. Even in 2000 it was somewhat true. But since then the other capitals have risen stead of Sydney falling.

  8. reposting:
    Years ago I explained how government had choked supply of residential land and poked demand hence driving up prices to buy or rent in my home city of Sydney.
    To my surprise I found that many people denied this obvious truth, claimed that there was no shortage of housing, housing was oversupplied and prices would soon crash like in USA, Ireland, Spain, Germany, France or Dutch Tulips.
    I was called a fool, a spruiker, a wilderbeest and worse. I was told that Sydney housing was just a simple bubble driven up by credit during a mania. They promised prices would soon crash. I am still waiting. Median prices seem to have reached a high plateau and stayed there since 2003.
    Whenever I asked the shortage-deniers for more information about USA, Ireland, Spain, Germany, France, etc, I discovered that they knew nothing about those places other than that house prices had risen and then fallen, and at some point other people had claimed there were shortages there. Apparently if someone claimed there was a shortage in Vegas, then prices fell, this meant I could not legitimately claim there was a shortage in Sydney now. I can’t follow their logic!

    • 100% correct Claw.

      Your message is simple, uncomplicated, and yet it is still misunderstood.

      Don’t you ever get frustrated by that?

      • I get a bit frustrated at times.

        I am tempted to borrow, buy and negative gear, and tell my tenants there is no shortage and they should wait for a crash. I am still a bit too idealistic to do that just yet.

    • oh yeah you got plenty of abuse here, I remember pretty well. I am pretty sure they would have had their financial position/life going forward quite a bit if they had not been locked in this bubble meme ( renters invested in gold 😉 )

      • dam, do you also remember the time you were French and (deliberately) wrote very bad English ?

        Don’t you think it is a bit rich for you to play the victim now?

      • @mav

        I m still a french and my English has improved tremendously since MB has added the edit function 😉

    • Yes, there is an even more acute shortage in Auckland and property prices are going gang busters, even while rents are relatively stable. Kind of makes the whole neo-classical supply-demand puzzle look a bit sketchy.

  9. Talking about bubble was and still is pretty silly, the stock on the market is extremely low, and there are tons of buyers looking.It s a supply / demand conundrum that s not going to change anytime soon, especially with a rapidly increasing population.There are very good reason to buy if you have access to finance,no bubble here.Investors dont have too much motivations to overpay, they are rational.

    There is no rule that says the average household should be able to buy an average home else it s a bubble.none.

    and remember Sydney prices went nowhere for a decade, it s catchup.

    • No doubt you are a Sydney property owner…. when the local house formation generation can’t afford to buy a simple dwelling… and the authorities pull every lever known to sustain the bubble…. that’s not sustainable.

      If I was you mate… I’d sell NOW!

  10. Bubble market conditions may result in an increase in price, stock creation or both. But it seems to me that, in identifying a bubble, it is probably useful conceptually to distinguish between a price bubble and a price & stock bubble.

    Most of the classic catastrophic bubbles had a big increase in stock. For example: vast swathes of Melbourne were built in the 1880s-1890s; all sorts of “dotcom” rubbish was being listed on NASDAQ in the late 1990s; it’s pretty easy to create tulip bulbs. I also recall that in the USA in 2008 it was said that there was several years worth of excess supply of housing.

    If supply runs away from fundamental demand, a portion of the new stock may be literally unsaleable when the market turns; when people compete to sell, there is no floor in price. But if there is an increase in price beyond market fundamentals, without an increase in stock, there will be latent demand, just at a lower price.

    By all accounts Sydney has the latter, which presumably puts it in line for a correction at some point, but not a true collapse.

    • Natural Sceptic

      While I’m not an expert, that matches my thoughts on it.

      There is of course a downside risk in that it is (theoretically) possible that something will change on the supply side (as so many sensible people have been pushing for) such as revised planning, broader land tax etc which will give both of those and allow a true collapse.

      However, given my nature, I don’t put a huge weight on that, given it would require politicians to pull their snouts out of the trough supplied by various vested interests (assuming they aren’t benefiting directly already) and commit political suicide to do so.

      Somehow I’m not seeing many politicians who look beyond self interest these days though.

  11. The Poms have figured out a solution to this EXACT same problem in London…

    Introduce, or even just threaten to introduce a CGT on foreign property speculators and stand back to watch the stampede as they bolt for the exits!

    The bubble will eventually bust… they always do! It’s only a question of timing.

    • “The Poms have figured out a solution to this EXACT same problem in London…”

      Who says our government even sees a problem here? Bubble prices… it’s exactly what they want.

      • Yep. Government is 3 steps ahead of the game. All policy adjustments will be to increase the size of the bubble.
        Inflation in real estate is demolishing the value cash at a unprecedented rate.
        The banks must be laughing hard.

  12. Note also a lot of the Sydney pricing probably comes from Harry Triguboff selling to offshore buyers like cashed-up Chinese nationals seeking to expatriate their money from running factories (or skimming money in the case of CP officials) out of China. That is a pure cash purchase, no borrowing required. Chinese investors expect magic high capital gains and don’t worry so much about ROI on rents. Also, if you’re paying cash for a property, rather than borrowing, ANY rent is positive cash flow, even if it’s 0.5%. Where did the few well-heeled Chinese get their money from? Well, when you bought your iPhone…

  13. Watching the Chinese dump their bitcoins on the market last night was fun. I wonder if they’ll move en masse in other speculative assets too?

    • Hell yeah. It’s going to be hilarious when china-property-speculation inc decides that there is a better place to park the cash…

  14. – Same story as in the US. Everyone now thinks that the rental market is the place to be. Is going to end horribly wrong.
    – Are those speculators hoping that the chinese are going to flock to australian property ?