Bubbleomics: Australian House Price

I have a mate with some rental property in Sydney so when I saw Mike Shedlock’s piece on Australian property I sent her the link.

Today I saw another article by Ironman at Political Calculation that, if I understood it correctly, says “stand down, the bubble popped in 2004."

I don’t know hardly anything about Australia or their house prices. I went there for ten days in 1988 and met a lot of very hospitable people, placed a bet on the Melbourne Cup and won, that’s about all I remember.

But I think I know a thing or two about bubbles, and although I suspect Ironman’s analysis might be a bit of an oversimplification - you need really to know the number of housing units and take into account the cost of long-money to get to the “fundamental” (Other-Than-Market-Value, in IVS speak). But his chart is probably “good enough for government work”.

I've shown where the line might go if “The General Theory” (of BubbleOmics) is as good as some of the other “General Theories”:

My point is that typically if you have a bubble you get an overshoot under the fundamental, and also bubbles don’t always pop in one go – (my view, for example, is that the S&P 500 popped in 2000 but it took until 2008 to get back to the equilibrium and 2009 to bottom).

So if that’s right, then the bubble was from about 2001 to 2009 (eight years) - so expect it to bottom perhaps in 2010 or 2011 and then get back to the “fundamental” (wherever that ends up) about 2017.

That is, of course, if my General Theory is right -although it’s worth noting that so far on Gold it appears to have been “before its time” (that’s a polite way to say “wrong”), although it has had its moments.