House prices too high


I’ve never been alarmist on the possibility of house price bubbles in Australia, but I just came across a piece in Business Spectator by Chris Joye. Chris argues that house prices are not too high, and he refers to part of a speech by RBA Deputy Governor Ric Battellino who is quoted as saying “if you look across the whole country, the ratio of house prices to income is not that different to most other countries.” What spooks me is that this quote is remarkably similar to the Greenspan “local froth” quote from 2005, when Greenspan argued that there wasn’t a national bubble in the US, “only a lot of local bubbles”.  Interesting. If you want reassurance read Chris’s piece, or Battellino on household debt, but if you want to panic, or sell the house, read Steve Keen.

2 Responses to "House prices too high"
  1. p/e ratios are just too simple and misleading for this asset!!!

    the (current) marginal buyer ,,,a rich foreigner has a much higher income (and wealth and need for insurance) than the average australian,,,,,,now and also into the future
    …. p/Australian e today is biased upwards…and the bias has increased over time…..and its a long duration asset

    even the oecd does not think there is a bubble in Asutralian housing…..mainly excess dd….and ss needs fixing as well as some subsidies/taxes 

  2. That’s what they said about the NASDAQ in 1999! The e’s will catch up to the P’s. Worry is those rich Chinese aren’t going to keep coming given where the exchange rate is right now. Would be useful if FIRB collected data on foreign purchases so we had some real data on that. Meantime I still can’t convince my wife to sell our house, so hope you’re right!

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