Trends and Cycles in Sydney and Melbourne House Prices from 1880 to 2011 by Nigel Stapledon.
Congratulations on an excellent contribution to this critically important discussion, Nigel Stapledon!
As for “Some of the probable reasons for that have been explored, but there is scope for further exploration” in the conclusion, I hope that at least a part of any such further exploration finds its way into analysing the public v. private capture of land rent, especially the worldwide fad to down-tax land from the outset of the 1970s. Is it merely coincidental that average weekly wages have also declined—and the rich-poor gap widened massively—since then?
I agree entirely, Philip. Your even longer time series than Stapledon might be incorporated into such a study.
Even better than the house price index is the new rental index from 1880-2011. This is the single most accurate and long-term index that shows how much revenue a proper land tax could make from the residential stock in Melb and Syd.
Stapledon’s analysis is strictly neoclassical; higher prices are outside of population and income growth must be the result of government intervention in the land market. While there is an element of fact here, notice that there is not a word about speculation or private debt determining asset prices. Stapledon has to know that the 1880s and 1920s land booms and consequent busts were caused by private debt speculation but this conclusion can’t be reached due to equilibrium modeling which omits money, credit, debt and therefore its effect upon asset values.
I would like to see a study utilizing disequilibrium price dynamics to properly separate the effects that debt speculation and government intervention into the land market has upon land values. I’ve read a lot of the studies from the US on analyzing the latter through the prism of equilibrium modeling, but not both, and certainly not from a dynamic disequilibrium perspective. Perhaps the excess of land prices above comparable rents can be solely attributed to debt speculation.