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Australian residential land value to GDP ratio now higher than Japan at height of 1989 bubble

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ABC finance host Alan Kohler has shared a “scary” housing chart, after Australia passed a grim milestone dating back to 1989.

ABC finance host Alan Kohler has shared a “scary” chart to illustrate Australia’s housing bubble – likening the current situation to Japan before the “lost decade” crash that saw prices drop 70 per cent. “And finally another scary, depressing way to look at house prices in Australia,” 

Kohler said at the end of Wednesday’s segment. “As a percentage of GDP, all residential land in Australia is now worth more than all Japanese land was in 1989 – and that was one of the great bubbles of all time, followed by one of the great crashes of all time.” He added: “But this time will be different, of course.” 

During Japan’s property bubble, the ratio of residential land value to GDP hit a record of more than 330 per cent. “We’ve just beaten that record in Australia, which is not a great starting point,” Dr Philipp Hofflin from Lazard Asset Management told Livewire Markets this week. “It certainly didn’t work out well in Japan.” Dr Hofflin also noted that during the period before the global financial crisis in the US, property prices rose by the equivalent of 60 per cent of GDP.

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