Refreshing to see some thoughtfulness and sanity in economic commentary. The grand old man, Ross Gittins, has produced an excellent little column on the housing market today. There is not much that I disagree with in his article. Gittins' colleagues would do well to take note. To quote the old fella:
"There are few signs we've entered a speculative bubble, even though all the indicators bar one suggest the housing market is hotting up...It's possible this will calm things down, but I doubt it. Why not? Because this boom's coming out of the fundamentals. Home prices are rising for all parts of the market bar the bottom quarter - first-home buyers' territory...Our fundamental problem is simple: demand for homes is running ahead of supply. The growing demand is being fed by exceptionally high levels of immigration. In a textbook world, increased demand eventually calls forth increased supply.But not in our world. The supply of additional homes is being constrained by the banks' unwillingness to resume lending for multi-dwelling development projects (temporarily, let's hope) and by the failure of state planning processes to make sufficient land and medium-density building opportunities available. The annual addition to the housing stock has been falling well short of new ''household formation'' for some years and there's no sign the annual shortfall will be closed."
