Dr Tulip’s bizarre claim that Australian housing is 30% undervalued and that owning a home is “now more attractive, relative to renting than it has been at any time in the past 30 years”, has gotten “Mad” Adam Carr excited enough to pen more click bait. From Business Spectator:
Claims by an RBA official — the aptly named Dr Tulip — caused a bit of a furore yesterday. You see, Dr Tulip dared to state an obvious truth: that housing is undervalued. And it is –of that there can be no doubt, no debate. It’s simply a mathematical reality.
Unfortunately, the furore over housing affordability — in the Australian context — has never really been about the analytical subtleties — the math — or even differences of opinion over methodology and the like. Nothing so noble. It’s based largely on pure emotion…
That, and some — mainly young first home buyers – feel frustrated at not been able to buy a penthouse in their preferred inner-city area…
Mad Adam has clearly drunk the same Kool Aid as Dr Tulip, who in April 2007 wrote the following about the Icelandic banking system just before it went belly-up:
This paper discusses recent developments and policy issues relating to financial markets in Iceland. Overall, the sector is thriving, both relative to history and to conditions in other countries. This bodes well not only for those directly involved in the industry but for the country as a whole, as financial development is an important source of economic growth.
Recently concerns have been expressed about the stability of the financial system; however the guarded assessment of financial supervisors and ratings agencies is that the system is broadly sound. A significant part of the credit for the vitality of the financial sector probably lies with government policy – in particular, the opening of the sector to international markets and the privatisation of the banks. Market liberalisation has been successful so far and should continue…
This growth of Iceland’s financial sector is interesting in its own right. But it is also highly encouraging for Iceland’s future economic prospects.
No doubt Dr Tulip’s assessment was based on another of his wacky models.
I won’t go through all the reasons why both Dr Tulip and Mad Adam are wrong in their assessment that Australian housing is undervalued, given these were explained in yesterday’s post.
What I will ask is this: if Australian housing is so cheap, then why have home ownership rates plummeted, particularly amongst the first home buying cohorts?
Shouldn’t younger Australians be piling in?
