When America’s housing bubble burst in 2006, housing prices in Australia hesitated only briefly before continuing to rise. Prices since then have risen to extreme levels, but now the Australian housing bubble seems to have reached its peak and is rapidly deflating. This is having dire implications for Australian banks, its currency, and its economy as a whole.
With the support of urban planners and “sustainability” advocates such as Peter Newman, most Australian states began imposing strict growth limits around major cities in the 1990s. The result was a rapid decline in housing affordability. In Melbourne, for example, median home prices rose from about 3.5 times median incomes in 1997 to 7.0 times in 2004.
According to Wendell Cox, who has been keeping track of housing affordability since 2004, prices in all major Australian housing markets were unaffordable by that year, with median home prices being at least five times median household incomes. While prices in some markets briefly dipped in parallel with those in the United States, prices in Sydney and Melbourne have risen dramatically. By 2015, Cox ranked Sydney second only to Hong Kong as the least-affordable housing market in the urban areas he studied (which are mainly in English-speaking nations). Continue reading
