There's an interesting post in the fairfax blogs today, with even more interesting comments following. The boom in property prices is pinned on the tax laws in Australia, which rather uniquely reward landlords for losing money on property they don't live in. Rental investors won $3.9B in tax deductions in the 2004-5 year. This creates an artificial demand for property from investors keen to lose money for a while, then sell up and pay Capital Gains Tax on only half the booty (thanks Mr Costello for this last refinement).
It's all terribly weird and complex for an economics numb skull like me, but worth attempting to understand for the next time this government tries to pin increased housing prices on urban growth boundaries.
THE AGE 13.02.07
Butterpaper forums - housing affordability