Housing Bubble Inception!
The recent strong growth in the housing market, coupled with record-low interest rates, has raised fears about a real estate price bubble.
I find it all quite amusing though as here they are, arguing about whether or not the slight up tick in housing prices might indicate that there’s a Housing Bubble… and yet none of them seem to make a point about the ridiculous one we’ve been in for the past decade!
I mean honestly, have a look at this graph:
Who in their right mind would see this graph and go “You know what? That last part seems normal!”
According to the many reports, all the banks and people should be “very careful” regarding buying property as we might be entering a bubble (that’s obviously bad) and yet, no one seems to be aware about what’s been and still is happening. House prices over the past decade have gone far beyond any reasonable actual value in many cases going from being 3 x the average income to 8,9 or even 10 x the average income… but it’s only NOW within the past few months with a few percentage point gains that people seem to think we’re in a housing bubble. I suspect this is in fact some kind of housing bubble inception. You know… a bubble within a bubble
I am still quite surprised though that prices are rising again. When housing costs are approaching 10 times your yearly (untaxed) salary I would have thought that it’d scare most people off. Obviously most people wish to purchase a home that is close to where they were raised and will conform to societal pressures etc but only to a certain point. If I told you that in order for you to marry your fiancée you’d have to first pay the government a “marriage fee” of $350,000… would you still get married? Or would you do without or better still, discover some way around the fee or create a different form of “marriage”?
It seems that most of the buyers of these properties lately isn’t FHB’s but investors both local and abroad. Obviously as investors they have vastly more capital than any FHB and so it’s uncertain what will become of this “new bubble”. I’m sure many of the local buyers are either the result of more housing spruikers or are simply following the crowd in betting that a greater fool will someday pay even more than the outrageous price they just bid. Given the greed that is present in virtually all humans I don’t think this will end or “pop” until some external force pokes its proverbial finger in too deep. If I had to make a guess I’d say it is going to be the collapse of the coal/gas mining industry due to China and the rest of the world all but banning the burning of coal and/or the collapse of the energy utilities/sector due to solar panel and battery uptake amongst Australian homes.