I was quite intrigued by the following statement in terms of how bad it was..

“It is looking increasingly clear that Australia has avoided the large falls in housing prices seen in some other countries over the past two years or so. This is a good thing, because of the macroeconomic difficulties that have accompanied those price falls in some countries. But, looking forward, the risk is that we might move towards undesirably strong growth in Australian housing prices. This raises a number of concerns, which seem to be widely shared in the community, as is witnessed by conferences such as this one.” — Statement directly from the Reserve Bank of Australia (see first paragraph of the article).

A short summary of the article is as follows (cynicism added by me)…

1. The article might as well be re-stated as “blah blah blah”, it is loaded with so much mis-direction it would make a magician jealous.
2. Falling housing prices are bad.
3. Rising house prices are also bad.
4. House prices are almost unaffordable now for normal people. This is bad.
5. Immigration will make it worse, since all new migrants are billionaires and will pay ridiculous prices for a house in Australia. Further pushing up prices.
6. Population growth will also make it all worse, since all new born will be super-rich and can obviously pay an unaffordable price.
7. An empty average block of land 30km from the city in Melbourne costs $150k (low-point).  This is quite unaffordable. Building costs are going up.
8. There is insufficient affordable housing.  This is bad. But, the market forces will cause a correction. Unfortunately falling house prices are bad, so we will not let that happen.

It is a confusing document that makes no clear argument except to say that the best possible outcome would be to have a constant price for housing.

What I do know is that salaries for the majority in Australia are growing between 2-4% (per year).  At this rate, salaries will double in approx. 20 years for the majority of Australia.  So, if house prices go up any faster … only the super-rich babies and ultra-rich immigrants will be buying a house.  The rest will just optimise as best as they can.

— rv

PS: My hypothesis is that house prices are going up because the banks are giving away credit at a very low interest.