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Housing - it's a boom, not a bubble

The housing market is at the start of a boom and is not in a bubble, with any such concerns premature, say HSBC economists.
By · 9 Oct 2013
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9 Oct 2013
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The housing market is at the start of a boom and is not in a bubble, with any such concerns premature, say HSBC economists.

But the risks of inflating a potential bubble may result in the Reserve Bank being reluctant to cut rates further, economists Paul Bloxham and Adam Richardson say in a research note.

They add that the rise in prices is trickling through to housing construction growth, as recent figures on building approvals show.

"Ideally, the RBA would like to see housing construction pick up without a housing price boom," they write.

"But developers and households are unlikely to build new houses unless prices are rising. In this way, a housing price boom is a necessary 'evil'."

The economists say previous falls in house prices between late 2010 and mid-2012 meant prices had to rise strongly to make up for previous losses.

"The starting point is also not as worrisome as some think - prices are high, but not unusually high when compared with similar countries. As we have said many times before, Australia does not currently have a housing bubble."
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