Econintersect: GEI contributor Steve Keen, Associate Professor of Economics at the University of Western Sydney, has written two detailed analysis articles about the potential 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 DebtConsolidation.com.au 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.
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.)
- This Time Had Better Be Different: House Prices and the Banks (Steve Keen, GEI Analysis, 11 April 2011)
- Australian Debt Update (Steve Keen, GEI Analysis, 08 April 2011)
- Debtwatch April 2007: Who’s having a housing crisis then? (Steve Keen, Steve Keen’s Debtwatch, 02 April 2007)