A well balanced refelection on the bubble argument that continues to brew for the Sydney market. We all know markets work in cycles, so why mess with it? We are simply paying now for the lagging supply in prior years, albiet exacerbated by the rise in infrastructure charges. But rising prices will stimulate supply and development activity which will lead us to the next phase of the cycle. For those who own the property they want, the price rises is great news but for those who don't, it makes the dream all the harder to reach with any relief being a medium term proposition at best.
We needed price rises to spark building. Some people point to investors pushing up prices. But, more fundamentally, it was the shortage of housing, triggered by low interest rates, that drove rises in both prices and building activity. Are rising prices a problem? ● Yes, for the affordability of home ownership. ● Perhaps, for the affordability of rents, but only to the extent that rising prices lead to increasing rents — and that’s not really happening now. On the contrary, increases in investor stock are easing shortages in the rental market. ● No, to the extent that they drive increased building to ease the housing shortage. Certainly, we should try to contain price rises without jeopardising the strength of building. It is more about the problem of development costs, including infrastructure charges, and the cost and availability of residential sites.