Yesterday's Australian gross domestic product (GDP) figures were better than most people had expected, with GDP in the December quarter rising 0.8% seasonally adjusted, bringing annual growth to 2.8%. (Original data here, example of reporting here).
Its been interesting reading the economic commentary over the last month, for it has bounced around depending on whether the news is good or bad. It's actually quite difficult to hold a steady view in the face of such reporting gyrations.
At this point, I think that we can say that so far Australia has survived the end of the mining investment boom better than expected, although biggish falls in mining related capital investment lie ahead. Overall growth is still below trend, still below the level required to soak up un and under employment.
I must admit that I'm worried about the apartment property bubble. Walking through Westfield Parramatta over the last few days, there is a stand at the front entrance predominantly manned by people of Chinese extraction selling a new apartment block. An article by Max Mason in the Sydney Morning Herald carries the headline Locals priced out by $24 billion Chinese property splurge. The analysis below the headline doesn't quite support that dramatic conclusion, but Chinese investment in certain parts of the metropolitan property market is driving demand.
Oh well, time to get on with the day!
3 comments:
People from out of town paying more than locals can afford isn't a bubble (so long as there are enough from out of town to keep on paying the high prices).
Unfair to locals perhaps but not a bubble.
So if the high prices are due to the out-of-towners then I don't think there is a bubble.
Interesting point. A bubble comes about when people buying in expectation of a capital gain push prices up leading to others jumping in so that the real value of the asset gets all out of kilter. When the gains stop, people start selling, driving prices down. The fall in value then triggers further sales compounded by loan defaults.
Does it matter if the buyers are out of towners? Mmmm. Say they stop buying, but don't sell because they have been buying for reasons other than capital gain. In that event, the market will stabilise with some downward pressure on prices as new apartments come onto the market. However, to the degree that locals have joined in the whole process, you might still get a bubble effect in the broader market. If the out of towners do sell, then you do get a bubble. However, to the degree that it has been funded by overseas funds without any local borrowings, the consequent losses would be born by the out of towners.
All very interesting.
Property bubble is unlikely the reason Australian GDP is on the rise.
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