[stephen_g]

I don't think that's true in most places though. In Australia we have crazy unaffordable house prices, and economists and politicians often say the problem is supply, but a group called LF economics did a study recently and found that our fastest growing markets were in oversupply for more than half the time the price has been rapidly rising.

As far as I can tell, the idea that it is a supply problem is just an assumption, assumed simply because neither neoclassical nor Austrian economics appear to have an understanding of credit and money creation by banks (through lending, which creates deposits) that lines up with how modern banks and the real-world monetary system works.

Some of the post-Keynesian models seem to match the real-world situation a lot more. The house prices seem to be so strongly distorted by speculation based on easy access to credit that the price statistics don't correlate almost at all with the supply surveys, but does strongly correlate to the amount of money created by lending. This explains pretty well what we're seeing, including how lowering interest rates will inflate asset prices instead of stimulating the real economy. But many people refuse to believe the data and the conclusions it leads to just on principal, because the idea of market prices not being set by supply and demand is blasphemy!

[gravypod]

Australia is a different case due to the lack of many urban areas. If development where allowed to continue at a faster pace with no red tape most of Australia could no doubt be turned into an economic super power much like Japan. The country is huge, has an extremely smart population, and is already known for engineering prowess. The heel that is Australia's weakness is high import tariffs on pretty much anything, poor ISP quality due to monopolies, and a select few urban areas.

This is also coupled with how great of a place Australia is to live to create a pretty high bar in housing prices. To be honest, if some things where changed about Australia I'd move there. It's got low crime, great politics so far, and a lot of things I like. It's just too focused on a select few areas and too pricey.