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Australian property market: boom and bust

15 May 2018
Real estate cycle is an old story
In the shadow of the slowdown in the housing sector in our capital cities and talk of a downturn and possible housing bubble bust, leading urban planners revisit an old story to highlight the cyclical nature of Australian’s property market.

Australian cities are awash with construction activity. From Collingwood to Kogarah, Marrickville to Newstead, every passing month seems to bring with it a new, sold-off-the-plan high-rise apartment tower. Real estate, it seems, is the true national sport.

Indeed, Australia now hosts the world’s most active market for securitised home loans and has the world’s second highest (and rising) levels of household debt. There are more cranes in the east coast capital cities than in the entire continent of North America.

And with the cranes and high-rise towers, come social problems and affordability crises: overcrowded schools, longer working hours to pay off mortgages, worsening homelessness. It is perhaps no surprise, then, that in recent polls, densification and housing affordability are among the issues of most concern to Australian voters.

Yet debates about land and housing crisis in Australia are nothing new. Indeed, the language that has formed around land and housing booms and busts over the last 200-odd years are revealing.

One of the first examples of an anti-land speculation measure appeared in 1812, when Governor Macquarie inserted a clause into each colonial land grant that forbade the resale of the granted land for a period of five years. Macquarie had found as very prevalent practice "the obtaining grants for the sole purpose of selling them".

Sydney Boom, Sydney Bust, M. T. Daly    (G. Allen & Unwin, 1982)

In his seminal work Sydney Boom, Sydney Bust (G. Allen & Unwin, 1982), Australian geographer and University of Sydney Emeritus Professor Maurice T Daly examined the nature of the housing market over a period of centuries and came to the conclusion that the property market, rather than a slow decline to apocalypse, was a cycle of peaks and troughs, boom and bust.

At the heart of Daly’s exploration is social justice and the implications of the cycle on the nation’s people. Indeed the idea of social justice – mining booms, foreign investment, over-capitalisation – these are not the phenomena of the 21st Century, but a cyclical, circular sceptre resulting from the ‘tradition’ of land ownership.

“City land booms have always been a snare of the people of the Australian colonies. Sydney, Melbourne, and Adelaide have been each in its turn badly smitten by the mania for gambling building allotments… But the memories of commercial disaster soon wear off, and when another spell of buoyant, confident, hopefulness and extravagance takes possession of the community, the same wild speculation and the same inevitable collapse of credit ensure…,” wrote Professor Daly.

These booms were only repetitions, on a larger scale, of what had already taken place repeatedly from the very earliest colonial days. In 1842, both in Sydney and Melbourne, business was so brisk and town properties passed from hand to hand so rapidly that almost everyone seemed to be making a fortune.
Maurice T Daly

Daly had predicted what now appears daily in the property pages of our national newspapers, and the quiet desperation of the suburban poor: “At the end of it all the city had sprawled even further; services were even more inadequate; the young and the poor were relatively worse off; investment funds which might have been put into production or socially useful activities had been dissipated; and millions of dollars of small investors’ funds had been lost as sharks and charlatans grew rich.”

“The victims of the [housing busts] included tens of thousands of ordinary people, and in a number of cases life savings were wiped out. The finance companies lent to a vast range of people, and were ultimately responsible for the acceleration in the rate of inflation of land values in Sydney in the early 1970s.” concluded Daly.

Those wielding power over Australian urban affairs would do well to read Daly’s work, lest the lessons from Sydney Boom, Sydney Bust be ignored for another generation.

This is an edited version of ‘Property speculation, global capital, urban planning and financialisation: Sydney Boom, Sydney Bust redux’ by Dr Dallas Rogers and PhD Candidate Alistair Sisson in the Sydney School of Architecture, Design and Planning and Professor Chris Gibson from the University of Wollongong. The article was originally published in Australian Geographer.

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