Australia Housing: Bubbles, Affordability and Shortages

August 15th, 2012
in econ_news, syndication

EconintersectGEI contributor Steve Keen, Associate Professor of Economics at the University of Western Sydney,  has written two detailed analysis articles about the housing-australia-rent-2006-2011potential for a housing bubble bursting in Australia.  Keen sees a deflation for housing as a very serious threat and has been on record that such is very likely for more than five years.

A new infographic from shows that housing affordability and housing shortages are problems in many Australian housing markets.  This puts the Australian housing boom in a different category than the one that occurred in the U.S. because there appears to be less of a case of overbuilding in Australia.  But the cost of owning and of renting in Australia has grown far faster than incomes and that plays back into the Steve Keen analysis of unsustainability.

Follow up:

One of the very interesting facts from the following infographic is that, while incomes have risen faster than median home prices over the past five years, both rents and mortgage payments have grown much faster than either median home prices or incomes.  The implication of those numbers is that home equity has been declining over the past five years, and/or interest rates are much higher now than 2007 making mortgage payments for the same amount of loan outstanding are much higher.  (Mortgage interest payments would increase for new purchases made as interest rates rose and older mortgages with adjustable rates would also have been hit.)

State of the Australian Property Market


John Lounsbury


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1 comment

  1. nick says :

    Fear! It's palpable out there with the Ponzi participants, up to their necks in debt. Don't matter if property prices crash, moderate or go sideways. They sure ain't going up for a long time to come. I sold the empty nest in early 2010 for just under 700K (Hills District). The buyer spent 80K on improvements, decking, gazebo, etc., and has just managed to sell it (don't ask me why) after about 10 months on the market for 20K less than he paid me for it two years ago. So with stamp duty, cost of sale and improvements, I estimate he's down about 120K. I'm renting on the coast.

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