Here's The Big Question For Australians: What Is A Housing Bubble, Anyway?

The housing bubble that isn’t continues to get a lots of air time with the latest update coming in a little twitter stream from AMP Capital’s Chief Economist, Shane Oliver.

Oliver warns against reading too much into the latest auction data, noting that property has returned just 5.3% per year in the 10 years to 2013 – well below average.

Property returned 11.8% a year in the 10 years to September 2003, so “the house price bubble was 10 years ago,” Oliver writes.

Which of course is true, as the chart below from the Australian Bureau of Statistics (ABS) shows.

Prices are starting to kick on, but the four-quarter rate of change is nowhere near where it was back in the early part of this century, or even where it was after the First Home Owner boost during the GFC.

On the other hand, the question could be more than just the rate of change of house prices – it’s potentially also about prices, and on that front ABS data shows that housing has never been more expensive in Australia.

Which is driving the share of first home owners as a percentage of all new loans financed each month to just 12.5%, the lowest since the ABS started publishing the share of first home owners in 1991.

So while prices might not be rising as fast as they have in the past, first home owners are being chased out of the market and average loan size is up around 70% from where they were in 2003.

All of which raises the question – what is a bubble?

Is it the rate of change in price? Or is it the fact that a large cohort of the population is being bid out of the market by the inextricable rise in house prices?

Time will tell.

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