Presented here is another comprehensive chart pack illustrating the 'Great Australian Land Bubble'.
This is the second part in a series exploring 150 years of Australian housing prices; the first part is here.
The most obvious indicator of a housing bubble is the long-term trend in housing prices, adjusted for inflation and quality. Prices increased by 123% between the trough in 1996 and apparent peak in 2010.
Between 1996 and 2010, real prices increased by 77% and 178% for Sydney and Melbourne, respectively. The growth in housing values for the latter city has far outstripped the former, which may be the result of Melbourne’s lower housing prices at the outset, allowing for higher prices before the interest repayment burden hits a wage-financed ceiling.
This is the “recovery” the spruikers are foaming about: housing prices tracking the rate of inflation. Further, the ABS index does not control for increases in the quality of the housing stock which would result in a .5 – 1% downward adjustment on an annual basis and does not take into account townhouses, apartments, and units.
All of Australia’s capital cities have experienced a boom in real housing prices beginning in the latter half of the 1990s. At the top of the table are Melbourne and Perth; although Perth’s boom was 2 per cent greater than Melbourne’s, quality adjustments would deflate the index, resulting in Melbourne as the top performer.