Australian property bubble

The Australian property bubble is the ongoing debate in Australia as to whether or not the Australian property market is significantly overpriced, and due for a significant downturn (also called a "correction" or "collapse"). The debate has been ongoing since at least 2001, with Australian property prices continuing to rise. Some commentators, including one Treasury official, claim the Australian property market is in a significant bubble.

The historically low interest rates, rising cost of living, negative gearing, capital gains tax concessions, high rents and volatile share market encourage investments in property. However, due to legislative changes that allow an excess of developments, there is currently an oversupply of housing.

Various industry professionals have argued that it is not a bubble and that house prices have the potential to keep rising in line with income growth. Some commentators have blamed rising property prices on state governments' restrictions on land supply, driving up the cost of land, lots, and thus homes. Some have also blamed planning rules as acting to restrain supply of housing.

A property bubble is a form of economic bubble normally characterised by a rapid increase in market prices of real property until they reach unsustainable levels relative to incomes and rents, and then decline. Australian house prices rose strongly relative to incomes and rents during the late 1990s and early 2000s; however, from 2003 to 2012 the price to income ratio and price to rent ratio have both remained fairly steady, with house prices tracking income and rent growth during that decade. Since 2012 prices have once again risen strongly relative to incomes and rents. In June 2014, the International Monetary Fund (IMF) reported that house prices in several developed countries are "well above the historical averages" and that Australia had the third highest house price-to-income ratio in the world. In June 2016, the Organisation for Economic Co-operation and Development (OECD) reported that Australia's housing boom could end in 'dramatic and destabilising' real estate hard landing.

The Australian property market has seen steady increases of around 3% per annum since the 1970s. Since the 1990s, however, prices have risen by around 6% per annum.

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