“Crikey” yesterday reported my colleague, Dr Gavin Putland, calling the bursting of Australia’s real estate bubble, based on Kavanagh-Putland Index data. The blue line in the index above represents Australia’s total real estate sales prices divided by GDP. The red line, depicting the annual change in the index, shows a decline of 30%. This is big!

The sharp drop is obviously in real estate turnover rather than a skyrocketing GDP. It doesn’t say much about real estate prices yet.  Suffice to note that turnover will always drop before prices, but property analysts, being more seduced by the level of sales prices than turnover will overlook this point.

Gavin explains more about the Kavanagh-Putland Index here.