Predictions of housing collapse in Australia get old
SYDNEY: Argument over whether Australian housing is in a bubble has dragged on for over a decade.
A Google search on the subject draws 600,000 returns. It even has its own Wikipedia page.
Three years after the global financial crisis hammered prices in the United States and Britain, Australian home values are just 5% below their lifetime highs. Recently, prices have begun to tick up again thanks to lower interest rates and a sound banking system still able and willing to lend.
Yet mortgage arrears are negligible, household debt has stabilised, savings are up sharply and unemployment is low, suggesting the housing market represents a modest threat to the economy.
The head of the country’s central bank certainly wonders what all the fuss is about.
“It has to be said that the housing market bubble, if that’s what it is, seems to be taking quite a long time to pop if that’s what it is going to do,” observed Reserve Bank of Australia (RBA) governor Glenn Stevens.
“The ingredients we would look for as signalling an imminent crash seem, if anything, less in evidence now than five years ago.”
And the RBA is no defender of rising home prices. As long ago as 1995 the then governor Ian Macfarlane was preaching that ever higher home costs was a social ill that made some people better off “at the expense of their children.”
In 2002 and 2003 the bank ran a verbal campaign against an overheating housing market that played a big part in restraining prices for a couple of years.
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