Every time I try to suggest to my family and friends that the Australian housing market is in a bubble – the likes of which no developed Western nation has ever seen before – I’m dismissed as a bit of a ‘crackpot’. Amongst the sneers and chuckles, I’m told that the Australian housing market is ‘different’. Yes, different. What makes it ‘different’ is something nobody can really tell me – but here are a few of the excuses I’ve heard:
ARGUMENT 1: WE’VE GOT BIG HOUSES – Largest in the world by some counts. According to our former Treasurer Joe Hockey, this means that Australia has a fundamentally different ‘asset’ class. Here’s exactly what he said:
A lot of Australians put a lot of new capital into their homes – renovate their homes, upgrade their homes – and we have the largest homes on average perhaps in the Western World, and the world more generally. So it’s a very different asset class in Australia than in other jurisdictions.
This means, naturally, we have to pay more for our houses – because they’re bigger than everyone else’s.
DEBUNKED: Hockey is correct in saying that a bigger house costs more than a smaller house. However, it doesn’t excuse why a median house price in Sydney is $1 million, whilst in Houston, a city of comparable size and wealth, it’s about $US146,600. Americans tend to challenge us for the title of most obnoxiously big houses in the Western world, so we’d hope to see some correlation there. But we don’t, the maths just simply doesn’t add up.