Housing Bubble in Sydney Soars to New High, Politicians Promote Scheme to Bitter End
“Buy property in Sydney and you’re ‘pretty well set for life’”: Government to first-time buyers.
How far can a desperate government go to keep the whole overleveraged edifice of a housing bubble from tumbling down and doing God-knows-what to the economy and the banks? Australia is trying to find out.
The housing bubble in Sydney and Melbourne, by now among the top in the world, is taking on grotesque proportions, not only in price increases, but also in political pronouncements. So much of the economy depends on this bubble that no politician can imagine bringing it down to earth.
Prices for all types of homes in Sydney jumped 19% in March year-over-year, according to CoreLogic, with houses up nearly 20% and “units” (we’d call them condos) up 15%. Sydney’s home prices have nearly doubled since 2008.
In Melbourne, overall home prices jumped 16%, with houses up 17%, and condos up 5%. The index for all dwellings in Canberra and Hobart also rose in the double-digits. In Adelaide and Brisbane, prices rose in the mid-single digits. Perth and Darwin showed declines in the 4.5% range.
The CoreLogic index is not based on sales pairs, such as the Case-Shiller index in the US, or on median prices, but on its own “hedonic methodology,” which, like the other two methods, has plenty of critics.
The government has its own Residential Property Price Indexes. The latest edition, released on March 21, was for Q4 2016, so a little slow. Based on the median price, the index for Sydney jumped 10.3% and for Melbourne 10.8%.
Real estate is highly leveraged, and household debt is at an all-time high. Wages even in Sydney haven’t risen at the same pace. So the inevitable is beginning to happen.
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