To misquote Shakespeare – Bubble, bubble toil and trouble? Has Research IP turned its focus to the housing sector?
No, we haven’t. Needless to say though, it is topical and data can often been seen in a vacuum of home bias. House price news across Australasia talks of bubbles and lack of affordability. Maybe this is something you see domestically because of the news skew to domestic data. Naturally domestic data is easier to get a hold of and we have a familiarity bias.
While New Zealand is not specifically mentioned in the UBS Global Real Estate Bubble Index 2021 and the corresponding Visual Capitalist infographic but the relationship between Sydney and Auckland is not too dissimilar. At least according to the respective local news services 😊
While the local news providers keep talking about local property prices and affordability, Australasia is not the only country where prices are growing.
The chart below highlights not only the changing value of a similar sized property across the globe, but the number of years a skilled service worker needs to work to be able to buy a 60m2 (650 sqft) flat near the city centre. While Sydney/Australasia is up there in terms of price and timeframes to ownership, it is not the most expensive city by a long shot, and the timeframe to own a unit compared to some cities is not unreasonable.
So, let’s put 60sqm in the perspective? To quote the lyrics from Supertramp’s 1979 song Breakfast in America:
“I never seem to get a lot (What she’s got? Not a lot)”
This apartment layout below is from a 60sqm Sydney apartment as advertised on realestate.com.au in 2013. This indicates you don’t really get a lot of space, “for Breakfast in” Sydney.
Within the confines of your country of residence, housing can seem expensive. However, when you look at it through a comparable lens, housing may not be in as big a bubble or as expensive and unachievable as you might think. Perception may or may not reflect reality. Perception and its relevance is a key concept in behavioural finance.
“Perception bias arises when an individual has difficulty figuring out what the problem is that needs to be solved…Perception biases run counter to the normal utility maximization paradigm that permeates economic and finance theory” – Wiley online library
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Photo credit: Visual Capitalist, UBS
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