On 28 August 2017, CEDA released a report on ‘Housing Australia’. Chapter 1 “Is the current period of price movement unusual?” is authored by Macroplan’s Chief Advisor Dr Nigel Stapledon.
While we like to think Australia’s experience is unique, the short answer is no. Dr Stapledon looks at the Australian and international experience over the past 50 (and 100) years and finds that Australia’s experience very much follows the international trends. Internationally, land and housing prices declined in the period to the mid-1950s and since then have risen sharply. The chapter briefly explores the economic trends and policies which caused land prices to rise so significantly in the last 50 odd years. On the policy front, while most product and financial markets have been de-regulated, urban land markets have become more highly regulated. Interestingly, the propensity to “regulate” supply has been more pronounced in high amenity/ high growth coastal cities, with cities in California and Australia being prime examples of that. People are attracted to these high amenity/high wage cities, but when that demand meets policies restricting supply, the end result is accentuated upward pressure on prices. In the US, a White House report in 2016 clearly identified supply issues as the real problem with President Obama saying “yes we can” fix it.
Dr Stapledon’s paper also looks at the cycles in the house prices, and more closely at the cycle starting from the mid-1990s and the latest post-2012 cycle. While sharp declines in interest rates in the 1990s and post-2008 have been the primary driver of house price inflation globally, the resources boom and its aftermath have added a few twists to the detail of the story of Australian.
Like all CEDA reports there are multiple invited authors with different perspectives and viewpoints, with some emphasising tax policies. When asked to comment, Dr Stapledon noted that in countries such as Canada, with very different tax policies to Australia, cities such as Vancouver and Toronto, are experiencing precisely the same affordability issues as Australia. While audiences might like an “easy solution”, the reality is that the hard yakka of fixing supply side constraints is the main game.
A copy of Dr Stapledon’s chapter can be found here. [Time to read: 12 minutes]
For those interested in the full CEDA report, it can be found here.
About the author:
Dr Nigel Stapledon
Nigel has a PhD in Economics from UNSW and a Bachelor of Economics with Honours from the University of Adelaide. He started his career in Canberra, where he worked in the Commonwealth Treasury, following this he worked at Westpac where he was Chief Economist. Nigel has been at UNSW Business School since 2003 where he completed a PhD on the long-run history of house prices in Australia. Nigel is a regular commentator in the media on macro-economics and housing., contact Nigel on 02 9221 5211 or firstname.lastname@example.org