Housing Market News:The big three-hearted economy

Economic situation is complex in 2015/16

RBA_Glen_Stevens

 

- Glenn Stevens calls Sydney house prices "crazy" -

 

Forecasting the housing market has become something of a shared preoccupation for much of Australia. The Australian economy is still in a weak stage of recovery - its recuperation not helped by various global events.

So many commentators watch factors such as house prices with the kind of intensity usually reserved for the hospital electro-cardiogram of a favourite ageing relative. There is concern if the beat is too slow, and just as much concern if the beat is too healthy.

To make matters worse, the patient we are so closely watching doesn't just have one heart. It has three hearts, and they are all beating at a different rate.

There is the heart that represents the Sydney/Melbourne property markets, a heart for the property markets elsewhere in Australia. The third heart is the beat of the economy itself.

At the moment the Sydney/Melbourne property heart is racing at about 120 beats per minute (bpm). The standard property market is mildly excited, at about 80 bpm. Meanwhile, the economic heart is weakly beating at about 40 bpm, with signs of a kind of arrhythmia developing from time to time.

All three hearts have become somewhat independent in the last five years, but the fate of each heart still affects the others. If the Sydney property market crashes, that will affect the property markets elsewhere and the economy itself. If the economy suffers a setback, that could crash the Sydney property market. Read more here

Source: HNN e-News