Can an economy grow by house prices alone? We’re about to find out because everything else is headed south fast. The seven drivers of GDP growth are all in deep trouble.
First, dwelling construction is collapsing. Theoretically, this will be arrested by rising house prices as building starts turn upwards in due course. But that does not account for the apartment defect crisis which has destroyed the credibility of an entire sector as governments flop around wondering what to do about it. Nobody with a brain will buy an apartment today meaning that dwelling starts will keep falling even as prices rise. I expect this will not stop until it reaches the depths of previous cyclical busts and, moreover, triggers a major shakeout in developers. The ongoing shrinkage in starts also robs any new cycle of the consumption boost from household goods.
Second, infrastructure investment is falling despite the hoopla of a boom. The rolling off of the NBN means there will be no growth and probably negative investment flow from major public projects ahead.
