In the last two articles in this series, I argued that Australia’s house prices “walk like a duck” – using BIS data, Australia is one of only four countries where prices are twice as high in real terms as they were in 1985. And they “quack like a duck” – accelerating household debt is a major driver of rising house prices, as in the other present and past house price bubble economies (the US, Spain, Japan, Norway, the UK and Denmark). So having concluded they’re a duck, what species of duck are they?
At first glance, the Australian house price bubble does appear to be a different species to its European and American brethren. Tacking Nigel Stapleton’s data onto the ABS series, we can develop an index for Australia going back to 1880 – compared to 1890 for America’s Shiller Index and (wait for it) 1628 for the Herengracht Canal Index. With 350 years of data, there is clearly no trend to the European series; and after the subprime crash, any argument that there is a trend to US prices now looks pretty shabby – even though prices are clearly rising once more in the Land of the Surveilled (see Figure 1).
Figure 1: Long term real house price indices