Increasing Housing Affordability by Identifying and Monitoring Property Cycles

Cycle theory is one of the basic human observations of the natural world as well as in human societies. It is defined by the Dictionary of Theories as ìevents, economics and political systems move through cycles similar to the natural life-cycles of living beingsî (Bothamley 2002, p.133). Being a subset of the market system, the level of house prices can be studied and explained in a way that is consistent with how the stability of the entire system is studied. Throughout the 20th century leading economists including Mitchell (1927) and Sherman (1991) defined the business cycle as a phenomenon found typically in a market economy and not to be seen in a pure planned economy. The character and importance of the market system and the pricing system has been demonstrated extensively in the literature with competing evidence and theories continuously being introduced (Friedman 1981; Samuelson 1992) (add Samuelson and Nordhaus, 2001). The history of modern society is where each market system is continuously seeking to identify the ëbalancing pointí or ëequilibriumí. As Schumpeter (1939) explained: ìanalysing business cycles means neither more nor less than analysing the economic process of the capitalist eraî. This proposal uses this proven body of knowledge about property cycles to examine and forecast medium to long-term housing cycles for individual suburbs in seven capital cities in Australia (i.e. Adelaide, Brisbane, Canberra, Darwin, Hobart, Melbourne, Perth and Sydney) , which in turn will reduce housing stress and increase affordability. An increased certainty about the potential for lower house prices will give household a higher level of confidence when considering whether to enter the market. Property cycle research must be supported by comprehensive data sources which are only recently available due to advancements in technology