Via Damien Boey at Credit Suisse:

We have just published an article on the drivers of the Sydney housing market recovery. Key points are as follows:

1. Sydney house prices are rising at a 22% quarter-annualized pace – but the speed of the recovery cannot be explained by local demand and supply factors. Our model of house prices based on home sales, net new buyer (investor and first home-buyer) participation, and supply from new construction and foreclosures, registers an improvement in the housing demand-to-supply balance – but not to levels consistent with an outright shortage in the market, and rising prices. Our model error as it were, is currently at all-time highs.

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