Me thinkest they protest too much:
The housing market is in the early stages of a solid cyclical upswing, buoyed by low interest rates, but it’s not a bubble, ANZ chief economist Warren Hogan says in a Committee for Economic Development of Australia report.
“Despite speculation that strong price gains represent the early stages of a house price bubble, our view is prices on the whole remain largely explained by low interest rates, sharply improved affordability, the release of pent-up sales demand created over recent years and an unprecedented (and increasing) shortage of physical housing stock,” Mr Hogan writes in a section of the report co-authored with ANZ economist Katie Hill.
But they add that they ”do not discount the possibility of a bubble in the future”.
“If Sydney experienced 10 per cent plus gains over multiple years and strong price gains broadened to other capital cities driver by accelerating credit growth, then we would be concerned and the Reserve Bank of Australia would likely be prompted to raise [interest] rates,” they write in the CEDA report.
…“Despite our expectation of further house price gains, our view is difficult home deposit affordability, higher unemployment and ongoing household and lender caution are likely to moderate price gains relative to earlier recoveries.”
Do they think that the US bubble, the UK bubble, every bubble, wasn’t underpinned by:
- low interest rates;
- sharply improved affordability;
- a shortage of physical stock (though high immigration is more unique), and
- rampant investor demand?
One other condition is needed, irrational exuberance, which Australians appear stuck in more or less permanently. These are the conditions of every housing bubble in history.
