The tendency is to accentuate the size of the moves by looking at trough‑to‑peak or peak‑to trough moves. Comparing like‑with‑like gives a better feel for underlying trends.
The dominance of the larger cities means Australia should be more susceptible to housing booms.
Price:income ratios are still historically high. Our consistent view over the years has been that the rise reflects a shift in household preference for and ability to access credit. And a shift in the type of housing we want to inhabit.
Nothing new here:
some rather weird selective data usage in analysing price rises while attacking selective data usage in analysing price rises;
the old urban population chestnut, and
the housing density argument which discounts the fact that most of price rises have actually been in the land not the house.
All bubbles are unique in some ways and all contain a kernel of truth too:
there was a tech revolution under the NASDAQ;
there were derivative innovations that extended US housing finances to new customers;
there were tulips in Holland etc, etc.
None of this changes the simple truth that house prices are absurd relative to every measure of income or yield both locally and internationally.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
