‘Bubbling Over’ – The End of Australia’s $2 Trillion Housing Party

by David Collyer on July 19, 2011

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A young academic has produced a fresh review of the economic fundamentals behind The Great Australian Land Bubble, and concluded “a collapse in property prices appears unavoidable”.

‘Bubbling Over’ examines the history of house prices in Australia from 1880 to 2011, including a critical analysis of the arguments offered by the mainstream against the existence of a bubble and compares these to robust and tangible statistics.

“Failing to recognise a $2 trillion bubble when Australia’s GDP is $1.35 trillion seriously undermines the standing and credibility of many of Australia’s so-called experts,” Prosper Australia Campaign Manager David Collyer said today.

“The conclusions in ‘Bubbling Over’ are very ugly: by any objective economic measure – house price to rent, household debt to assets, median house price to income multiple, mortgage debt to GDP, household debt to disposable income – residential property is ‘severely overvalued’.”

“Philip Soos demolishes the myths force-fed to aspiring homebuyers by salaried real estate types, financiers and the economists who have denied or missed this land bubble altogether,”  Collyer said.

“Prosper is proud to release this document.  It adds evidence and substance to the current one-sided debate. It lays out in clear terms with unshakable logic why the only support to current property prices is real estate industry ‘spin’.

Prosper’s Don’t Buy Now! Home Buyers Strike campaign has been urging young and innocent first home buyers to stand aside from the residential property market as prices have diverged so far from fundamentals that anyone buying now faces a lifetime of debt slavery.

“We say price falls are both imminent and unstoppable. Philip Soos explains why,” Collyer concluded. “This is essential reading for every citizen thinking of buying.”

‘Bubbling Over’ by Philip Soos can be downloaded here.

About Philip Soos: Philip Soos is a Masters research student and researcher employed at Deakin University, working towards a doctorate in political economy. He specializes in the comparative analysis of domestic and international pharmaceutical research and development systems. Philip also holds MBA and IT degrees from RMIT University and Swinburne University of Technology, respectively. Email: psoos@deakin.edu.au

 

Listen to Philip Soos on Renegade Economists 3CR 855AM 5.30 pm 20 July or podcast via iTunes

 

13 Comments

  1. Technofreak19-07-2011

    Thanks for sharing, will read it for sure!

  2. Susan Valence20-07-2011

    While I agree with that the author has to say – essentially that the real estate market is not looking good for Australia, when I looked at the document it became clear – it is not an ‘academic’ study, research or report. Besides the lack of quality, it does not present any new findings, methodologies or analysis but instead represents information from Australian real estate blogs – and not in the well written or a logically coherent form. There are also some ill-thought irrational ideological deviations.

    To the authors credit, he has been diligent and has mostly referenced. I guess economics/finance and public policy is not his area of expertise. But kudos to him for making the effort and putting it out there.

    People would be better off going directly to the real estate bubble blogs. (Bubblepedia, Oz Housing Bubble etc).

    However, the gullible should not be under the impression that this is a financial/economic report.
    I wish well to the Author and hopes he lands up in the media to explain the bubble that the vast majority still seem to be believe will go on forever.

  3. Clive Marks22-07-2011

    Susan Valence (July 20th)

    I have yet to read the article. As as interested party with no vested interest I welcome any independent opinion.

    However, I am deeply suspicious of people who offer criticism and make claims (eg. is not academic; provides no new information; has irrational and illogical deviations etc). Maybe so, but there is nothing gained if you don’t specifically point out what you mean. Without specifics, this seems to be a continuation of hollow spruiker speak. After all, the analysis is what counts, not the spin. You just can’t offer a conclusion based upon no justification. People who do so are called real estate agents.

    Cheers

  4. Clive Marks22-07-2011

    Susan Valance

    I just looked at this article briefly and was very impressed. If you can point me to a better presented and more comprehensive treatment of this issue I would be most grateful! Please do, I would like to see what you think is a better benchmark. Please point to the areas that you feel are illogical.

    I loved that last paragraph that seemed to nail the entire issue as it cuts to the nature of the information we discuss. It has rare clarity:

    “Seemingly, the majority of economists, especially those in prominent positions within institutions such as the RBA, Treasury, universities, the banking, financial and real estate industries, reject the notion that a bubble exists in the residential property market. This is unsurprising, given the track record of establishment economists in overlooking asset bubbles. The Dot-Com bubble that formed in the stock market during the late 1990s and the GFC of 2008 are but two examples where the vast majority of economists missed the obvious, even when there were some economists who did accurately predict such events and attempted to warn the public of impending danger. Thus, the analysis and commentary of mainstream economists, especially those within leading policy-making positions, tell us little about the future of the housing market and general economy, and their optimism should be greeted with a great deal of skepticism.”

  5. Edward J. Dodson23-07-2011

    For what it is worth …

    The understanding of property market cycles here in the United States is no better than it appears to be in Australia DESPITE a signifcant academic and professional literature that can be quoted from to point other “experts” in the right directions.

    With 35 years working in the real estate development and finance industry, what I can say with some certainty is that law and public policy has for generations been in place to reward property (meaning land, for the most part) speculators. In our case here in the U.S. land speculation is something of a national creed that goes back to the first settlers and the first “great” family fortunes, including that of George Washington. I would venture to guess that a close look at Australia’s history would parallel that of the U.S. rather closely.

  6. The realestatenavigator23-07-2011

    Back to basics – Cash Flow – Sensible return on investment rates rather than capital growth and low rental returns. Positive cash flow and risk aversion are the new norm (i.e value for money – cash is king) – Nothing new – The speculators have left the building!!

  7. Dave Lindburg03-08-2011

    I had always known our mortgage debt was a problem but had no idea that it had blown out to 2 trillion dollars; I guess a soft landing is out of the question? It’ll probably unwind over fifteen years (at least) since it took twenty years to inflate to this point.

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