Is Melbourne in A Real Estate Bubble?
Last edited 02/01/2017 - 13:21
Happy New Year Everybody. Yes it's two days away.
Now, I thought I'd throw the question to the OzBargain audience. I got some good points of view last time I asked, so I expect more of the same. I could only be bothered looking for Melbourne information, as if I looked for other cities I'd have 700% more work to do for a forum post when I'm supposed to be working.
Reasons why I think we're in a real estate bubble:
- Low to no wage growth ABS Data
- Inflation similar to wage growth RBA Data
- House price growth doubles inflation and wage growth on the most conservative measure, quadruples it on the real growers REIV data
So what I see, and correct me as I know you will if I'm wrong, is that the only improvement in earnings for average Melbournian comes from inflation. While at the same time, housing prices were bid up at 4x the rate of wage growth. I'm going to vote "yes", it's a bubble. The largest determinant of price is the market's ability to sustain those prices. We're not all doctors and lawyers, and most of us can't afford a place in Melbourne anymore. I just can't see how this is sustainable.
Go on then, educate me.
EDIT We've got some excellent thoughts from well educated people so far. Thanks to everyone who's weighing in, and to anyone else - feel free to lay it on me.
SECOND EDIT Thanks for all the useful opinions everyone. I fear people missed my point and started arguing about whether property is affordable or not. Yeah, I know it's not affordable. There are plenty of things that aren't affordable, and their price isn't going to change much regardless of the fact. It's $244k for one share of Birkshire Hathaway, but that's no bubble.