This is going to be an even more controversial assertion, but if property equates to (note: I did not say accounts for) about 30% of GDP then it has a big effect on inflation itself. Property is intensely important to the Australian economy, I would argue that it is vastly more important than mining.
Sure we could end up with deflation and because building homes seems to track inflation quite steadily I imagine it would also track deflation in the same way. Maybe even be ahead of the curve because building activity is the first to suffer in a recession, indeed it is often building activity falling away that happens to cause a recession.
Its a common way into a recession see the USA house prices fell activity dried up and the country went into a tailspin. However I do believe it is about the best place for stimulous money to get us out. I am not talking houses on the way out btw, bridges, roads, ports, rail and airports.
I didn't say it was easy to make money building homes. It's a high risk game, and it's far from value investing.
This is the point. The government wrings its hands and says we have an affordability problem in this country. It then sets about releasing only enough land to meet population growth, so the market can be speculated upon. On top of this it then taxes developers. You said earlier the market was broken, it is not broken it is responding naturally to the stupid costs of production and building stuff all till prices exceed costs sufficiently. You can look at the building figures against historical terms and know Perth and Brisbane had their surge a few years back.
Melbourne has had its and is still building plenty of homes. Sydney, well no wonder people are leaving teh joint in droves, I am quite certain between the urban consolidation plan and the 100k on greenfield sites they are even at the current ridiculous prices not building enough new homes.
It is at least to me as clear as day what the problem is; there is not enough profit in building homes. Developers do not build a home based on how many people they think there will be in Australia in 2015 and so how many they need to build. They say what can I sell these shacks for and then decide whether it is feasible. It has nothing to do with utility rates etc these are macro factors but the supply curve is as it is because developers make more profit the higher the price so build more homes. This is unless costs are inflated by stupid government policy. This is our problem in Australia, we will come undone only if affordability factors are in play or the government changes its policy. We are not going to see the massive supply response the USA had to high prices because our government considers this a windfall profit and moves in to tax it.