looking at the sydney prices (inflation adjusted) graph:

Now what is it that causes such a massive spike in house prices in the mid 1950s? that appears to see no end?

Granted prices spike in approx 1880-1890 but look where they end up in 1900 then there are around 3 spikes in prices from then till the mid 1950s but each boom has a bust or recorrection which gives us a pretty flat line overall for 70 years.

then post 1955 we have 4 j shaped curves that just keep going skyward.

However where does the trend line fall if you include the large peak caused by the land boom in the 1890s. If we disregard the “noise” between 1890-1950 due to 2 world wars and many other conflicts that drew on the men of australia etc and a great depression , does that make the trend line fit more appropriately?

So is the time since 1955 bucking the trend or following the trend?

The broad picture that his time series paints is one of prices essentially showing no trend for three centuries, with cycles related to the economic events. Against that long term perspective the post 1970 rise in house prices in Holland stands out. But one city is probably not convincing.

Moreover, there was clearly a structural shift in Australian prices (as indeed elsewhere around the world) sometime in the 1950s. As Mike Beggs observes in his comments, this was a time of significant change in the world of finance. So, Sydney’s prices since then have behaved differently not only to the long run Herrengracht prices but to Sydney’s own prices in earlier times. The key question is whether this is a temporary (albeit 50+ year) phase?

As for Sydney’s experience in the late 1980s and 1990s, prices did not experience the precipitous collapse seen in the UK. Instead, the rate of change in prices slowed for a number of years. I have zoomed in on this period here:

@Mike: there were some interesting insights into the major changes to the US mortgage market following the depression on this recent NPR planet money podcast. It’s a good listen (as indeed are all of the episodes). While some of these changes did not take place in Australia (e.g. the creation of Fannie and Freddie and the prevalence of 30yr fixed rate mortgages without break costs), there are some analogies to Australia’s experience.

Obviously harder to work out but I feel equally enlightning would be the annualised growth rate in Sydney prices between 1880-1960. Do these show a 9% pa ?

Also when the UK had big property price drops of around 30% (and reposessions) in 1988-1996 did Sydney experience similar falls and “blood on the streets”?

Has your data mining on property come across any data relevant to the changes in growth in supply of housing over time. Often I hear references to limited supply of new housing as an explanation of house prices. There seems to be two likely sources of new housing supply. New zonings of land that allows land previously unable to used for housing to be used for housing and changes to rules that allow more dwellings than previously allowed on existing land zoned for housing.

In theory both sources of new supply should be measurable. Greenfield zonings usually specify restrictions that result in a reasonably certain number of potential dwellings and the same could be said for changes to zonings of existing residential land (for example 3 suburban blocks re-zoned for 2 storey townhouses of minimum size X means 3 could become say 12 townhouses).

Just curious whether you have seen anything along these lines.

Anyway, now I’ll re-read that piece by Keen (I think I read it when he first posted it, but he’s written a lot on the subject, so I may be thinking of an earlier one). In the meantime, have you seen any LVR data for Australia? I haven’t got any handy at the moment, but my memory from when I last looked (primarily at pools that were securitised) is that average LVRs were in the 65-70% range, which is not particularly high and that the vast bulk of mortgage lending in Australia is capped at 95%. This information could be out of date.

He doesn’t focus narrowly on housing – he sees that as one aspect of the debt bubble – but the most focused comment of his on housing prices is
http://www.debtdeflation.com/blogs/2009/04/06/steve-keens-debtwatch-no-33-april-2009-lies-damned-lies-and-housing-statistics/

Danny.