There has been a lot of articles about the high price of Sydney housing and how we are in the middle of an asset bubble, comparable to Japan in the 80's.
So definitely the Sydney House Prices have been more volatile than the CPI changes, but definitely not greater. In fact, if you calculate the average house price change, it equals to 3.1%. This compares extremely well with the average Sydney CPI change of 2.7%
One definition of an asset bubble is asset prices increasing at far greater rates than the CPI (or rate of inflation). So, using the latest stats from the ABS, I have charted the percentage changes in the Sydney housing price index from the quarter to the corresponding quarter of the previous year Vs the Sydney CPI index percentage changes from the quarter to the corresponding quarter of the previous year. I ended up with the following graph from March 2003 to December 2009 (the only stats available)
So definitely the Sydney House Prices have been more volatile than the CPI changes, but definitely not greater. In fact, if you calculate the average house price change, it equals to 3.1%. This compares extremely well with the average Sydney CPI change of 2.7%Melbourne on the other hand is a different kettle of fish. See the graph below
Melbourne Housing Price has increased at an average rate of 8.7% every year Vs the Melbourne CPI increasing at 2.7% Close to a bubble there I believe.
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