Carrington Clarke

not raising rates any further.

We're already saying a June rate hike is pretty much off the agenda as far as markets are concerned.

Bets on another rate hike in August or September later this year are being lowered.

And there's a good chance if this does lead to a housing downturn that we could start talking about rate cuts again by the end of this year, putting a bit of a floor under how far these house price falls go.

So swings and roundabouts, that would obviously be good news for the government because it

existing homeowners with a mortgage really love their mortgage rates falling.

And if this contributes to that, that's a pretty positive selling point.

It's a tricky one.

It's especially hard to do graphs on a podcast.

But look, in the time we have, the best approximation I can come to is a report the Productivity Commission released early last year where they found that housing construction productivity had fallen by 50% in Australia over the past three decades.

But then their wonks did that kind of modelling around housing construction

construction costs and found that even when you adjusted for the fact that houses were bigger and better, housing construction productivity had fallen by 12%.

And broadly, you can translate that into saying all other things being equal, housing construction costs were up

would have gone up by about 12% or more for the same quality or size of property.

So there's a rising cost for an equivalent build on that side.

But then putting my land economics hat on, the single biggest factor behind the surge in Australian housing prices over the past couple of decades is the land price.

The land price in the major cities is the significant component of the inflation we've seen.

COVID period aside, where we did see, you know, very substantial rise in building costs more broadly over the past few decades, it's this surge in the price of well-placed land in our capital cities that's been the major factor driving up housing costs.

And you can see that because apartment costs have risen nowhere near as much in a city like Sydney as standalone house, because the land price on that standalone house has gone through the roof.

It's controlled by the governments and there's a lot of talk in economics about the planning rules, but people also forget, including the advocates of changing the planning rules and making it easier to develop.