Remember your first economics class as the professor showed the supply versus demand curve and it seemed such a basic concept?
Well if you need proof that it works, just look at the housing markets in the United States and Australia. Both immigrant countries that have relatively short histories the housing markets differ greatly.
Australia with a much smaller population base has a shortage of housing. The United States after gorging itself on cheap lending and a housing boom has an excess of housing.
In Australia housing prices have been rising and demand far exceeds supply.
In the United States housing prices have been dropping and supply far exceeds demand.
2 similar countries, 2 very different housing markets.
The source of her frustration — a shortage of 200,000 dwellings — is helping fuel Australian home prices, which are 82 percent higher than in the U.S., and disproving investors such as Jeremy Grantham, who says they will fall 42 percent as interest rates rise in one of the world’s priciest home markets.
“It will take years to turn the shortage around,” said Matthew Bell, an economist at Australian Property Monitors, a researcher cited by the central bank. “When it comes down to it, that’s fundamentally what’s going to drive the market.”
Australia’s median home price was 6.8 times gross yearly income last year, compared with 5.1 times in the U.K. and 2.9 times in the U.S., according to the annual Demographia International Housing Affordability Survey. The nation of 22 million people has six of the 10 most unaffordable cities among the U.S., U.K., Canada, Ireland, New Zealand and Australia, the survey showed.
The median home in Australian cities cost A$468,000 ($395,000) in May, figures from real estate monitoring company RP Data show. The median price of a new home sold in the U.S. in 2009 was $216,700, according to government data.