The treasury too claims Australia has not built enough dwellings to house a growing population, yet publicly admitted in a parliamentary inquiry that it has not performed any research on this issue. If the treasury had done, it would have arrived at the same conclusion as LF Economics: Australia has had a cumulative oversupply of housing since real dwelling prices began to boom back in 1996.
The research is supported by calculating the flow of new dwellings to new households on a quarterly basis, adjusted for demolitions, secondary homes, population growth and demographic change. There was a temporary shortage (dwelling deficits) during the global financial crisis and in the mining towns, evidenced by the rise in real rents and rent to income ratios. Outside of that, Australia has constructed more than enough homes.
Most of the price inflation occurred during a 10-year period between 1996 and 2006, while significant dwelling surpluses were generated via exuberant construction and low population growth. According to the data Australia, relative to scale, out-built even the US during this period. Just like Australia, the economics profession in the US claimed high house prices were due to a shortage which was revealed to be false.
What the economic mandarins have failed to acknowledge is the link between dwelling price growth and the expanding sums of debt that are continually pumped into the housing market by our deregulated and liberalised banking and financial system. Australian households have borrowed colossal sums of debt to finance an all-in bet on property speculation. This is the real cause of high prices, not a phantom shortage.
The latest figures from the Bank of International Settlements for the first quarter of 2015 shows Australia has the third-highest unconsolidated household liabilities to GDP ratio among OECD and Bric (Brazil, Russia, India and China) nations, at 120%. Switzerland is in second place (121%) and Denmark has the unfortunate dishonour of topping the charts with 127%.
Denmark peaked at an ungodly ratio of 140% in the fourth quarter of 2009 and has since deleveraged as its housing bubble burst during the global financial crisis. Given the trend in this ratio, Australia looks set to surpass Switzerland for second place by the second or third quarter of this year. Australia could overtake Denmark for first place by late 2016 or early 2017. Unlike a gold medal at the Olympics, Australia should not take pride in this development.
Research by the US Federal Reserve has shown the household debt to GDP ratio increased the most for Australia between 1960 and 2010 out of a select group of OECD nations. Other countries recently affected by bursting housing bubbles, for instance, the Netherlands, US, Denmark and Spain, had similarly large surges in household (mortgage) debt.
Banks have treated our housing market like a Ponzi scheme, and it's about to bust
Lindsay David
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Unfortunately, the focus is on Australia's historically and internationally minimal levels of public debt. By misdirecting attention on reducing public debt and the deficit, the burden is increasingly placed on the private sector to generate growth by expanding on the existing mountain of private sector debt in the face of persistent current account deficits.
Sydney and Melbourne are currently where the bulk of new private debt is created. Although property investor debt has tapered off slightly, the banks have simply switched their efforts to ramp up lending to owner-occupiers. While investor debt has surged over the years, the owner-occupier cohort still dominates in terms of absolute debt issuance.
http://www.theguardian.com/commenti...x-the-housing-crisis-before-the-bubble-bursts
