The Irish planning system also contributed to the bubble, he argues, by creating a system of supply that was unresponsive to market demand. Governments granted planning permits ‘too late’, resulting in the building of large numbers of standardised, small, poor-quality homes in satellite locations far from city centres – something van Onselen believes is currently happing in certain parts of Australia, including Melbourne.
There are, of course, significant differences between the Irish and Australian economies and van Onselen believes that an Australian housing bubble, while certainly possible, wouldn’t likely be as dramatic as the Irish one.
“There are some pretty big differences. Irelands exchange rate and monetary policy is set by the ECB, while Australia has control over its own economy.”
Ireland also doesn’t have Australia’s mining sector, but van Onselen warns that, if we were to experience a mining bust, ‘that could be our catalyst’.
“There certainly are a lot of similarities, but I don’t think we’d have nearly as big a bust as Ireland; we’ll have a similar, less drastic fate. The risk for Australia is it basically hinges on the mining boom. If we had a big, big drop-off in mining, we could have a pretty big drastic adjustment. But it’s hard to say what the price adjustment would be if that happened. I couldn’t see Australia being anywhere near 50% [reduction in home values] but 20% could be possible.”