REIA bursts housing bubble

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Australia is not in the midst of a housing bubble, says the Real Estate Institute of Australia, contrary to recent comments by GMO's chief strategist Jeremy Grantham.

“What we are experiencing in the housing market is normal growth for house prices. If Australia was in the midst of a so-called housing bubble, then we have been there for some time. REIA’s data highlights that historically, median prices, compared to income, have been relatively stable for the past ten years, taking into account normal fluctuations,” said David Airey, president.

According to the REIA over the period December 1996 – December 2009, median house prices increased from around $160k to around $500; a trebling in 13 years. But within this period there were four phases.

From December 1996 to September 2000, median house prices in Australia showed a moderate average growth of 2.1% per quarter.

From December 2000 to December 2003, house prices appreciated at 3.9% per quarter on average.

Then from March 2004 to December 2008, the average growth slowed to 0.8% per quarter.

During 2009, growth of median house prices picked up pace to 2.9% per quarter.

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