The housing bubble Whodunnit

Flattr this!

This arti­cle is the third in a series on Australia’s hous­ing mar­ket. Read the first arti­cle here and sec­ond arti­cle here.

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

Graph for The housing bubble Whodunnit

Click here to read the rest of this post

Bookmark the permalink.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.