Why a Housing Bubble in Australia

Here i provide the primary reason as to why we're experiencing a bubble = significant expansion of credit/money supply due to Reserve Bank/government policy (amongst other minor factors, ie government grants). I gloss over many points for times sake, but will get into more detail in future posts. This is intended only as an introduction to the topic of asset bubbles.

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[Babys1306]

The main problem in Australia, which I believe is a tragedy, is the fact the house bubble burst was avoided because of the mining bubble, related to China's bubble. Once this "shield" will be broken, I wouldn't want to be around. I don't want to be pessimist, but I believe that a wise nation should learn from other's mistake. The mining bubble is the source of inflation, and by consequence our lack of competitiveness in other sectors. What do you guys think? All opinions are constructive!

[AussieAustrianBlog]

@Babys1306 Yes, that is a small part of the story. However, it is much more simple than that. The fundamental reason we have not had a significant down turn earlier is because credit never really dried up. All asset bubbles are credit driven, when this flow contracts, prices fall. With property, it is never an overnight phenomenon, i.e. 10% drop in 1 month.

[tri400]

picked up ur daily copy of the Financial Review 0:10?

why dont u subscribe to it and save money

[AussieAustrianBlog]

@tri400 I am a subscriber to afr.com.au....not sure as to the point of your post

[Navium]

As long as bogans have to have their Mc Mansions to store all their crap they don't need, bought with money they don't have...nothing will change.

But how can bogans have an idea how the economy works....if they understood, they could have avoided, that the majority of their economy is foreign owned...

LOL

oh well..good luck with your shoddy houses....cheeply made and overprized so called houses...have a look how we handle it in Germany...houses are better made and affordable

[AussieAustrianBlog]

@Navium Explain your foreign ownership comment. I'm intrigued to know how that is a bad thing. Thx.

[o0POSH0o]

If there is too few houses to go around....the price goes up. At the same time there is pressure to build more houses. If so, the current houses that are valued at the current prices are under threat from new houses being built. So if you're an investor, I would sell up quick before a building boom comes.

[mysupermaltese]

Great video! A few people i know borrow so much now are paying their mortgages then live below their need,.now hanging on to their jobs that they hate. Thank you for your video, at least I feel I am not along.

[Babys1306]

@AussieAustrianBlog So, I definitely know that it's such a general, simplistic question, but a lot is NOT said nowadays about the state of economic fundamentals in Australia. Do you see a major downturn in the Oz economy? Do you think much of it will depend on our mining industry, commodity prices etc, or we're going to face difficulties no matter what happens with China's more or less important burst? Once again thanks for your first answer.

[charlie000111]

nice video, except house prices are still over the roof

[mfl002]

@gsaussie Nope, Chris is right, banks do create money.

See mises.org/daily/4499 for a simple and straight-forward explanation on how this happens.

[gsaussie]

Hi Chris, I suggest you look a little closer into fractional banking. You are incorrect in saying money is created by the banks.

[winnah2314]

well said buddy top work, explaining austrian economics to yuppies is so hard :/