PHOTO: Australian property market

Well, it’s been a good run I suppose.

A three-decade run to be exact…

From the early 1990s up until today, the property market has been a one-way ticket to riches for most Australians.

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Not even the ferocity of the GFC in 2008 could put a halt to it.

This property price resilience was in stark contrast to the experience in the rest of the world. And it cemented the belief that Aussie house prices only ever went one way — up.

But as this amazing chart below shows, we’ve been living a distorted reality for far too long…

A warped reality

Money Morning
Source: Dallas Federal Reserve[Click to open in a new window]

This chart is a powerful example of how far out of whack we’ve let things get.

Compared to the average of comparable countries, property in Australia has become increasingly unaffordable.

Out of the 23 countries in this group, we have let the economic tether between incomes and property prices become too stretched.

Our uniquely generous treatment of property assets in both taxation and retirement policy has played a large part in this.

Few other countries allow negative gearing on investment properties to such an extent. And your principle residence isn’t just exempt from tax, it’s also exempt from any Centrelink age pension tests.

These factors have all combined over the years to push up house prices by a far greater degree than mere rises in income.

Though, the advent of double-income families and super-low interest rates have also played their part in pushing property values higher.

We’ve been conditioned to think this is all normal.

‘House prices always go up’ is what most people in Australia will tell you.

But the truth is clear: Australia is an outlier in this.

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