The Australian housing bubble, or lack thereof, has again been dominating headlines in recent weeks, since a segment aired on 60 Minutes. I’m too battle-scarred to see any upside in proffering an opinion on the matter.
But there is one statistical anomaly that keeps rearing its head that I’d like to call ‘bullshit’ on. And that is the extent to which Australia is more ‘urbanised’ than most other countries.
Australia is a highly urbanised country, or perhaps more accurately ‘suburbanised’. More so than most nations. This is offered as a justification for higher house prices, and perhaps not without reason. But there’s an old RBA chart redoing the rounds at the moment that is flat out wrong. It was most recently republished in Fairfax article Property bubble fears are overblown, says CBA.
The chart is at least a few years old, the first reference I can find is Graph 6 in this 2013 speech by Luci Ellis of the RBA, but the data may be older. It certainly appears to have been compiled by the RBA. Here’s a replication of the chart from that 2013 speech.
Let’s try and recreate the numbers for Australia and a few other nations.
It says the ‘urban population’ of Australia, living in cities of greater than 100,000 people, is a little north of 75%. This is clearly constructed using the entire metropolitan area of each city greater than 100,000. A quick gander at Wikipedia suggests that if we add up the entire metro population of each city from Sydney, population 4.8 million, down to number 16, Toowoomba, the smallest with a population greater than 100,000, about 17.9 million people live in these ‘urban’ areas. That’s about 77% of Australia’s population of 23.13m, according to Wikipedia, and lines up nicely with the claim from the chart.
Now let’s look at the US. Here, according to the data provide by RBA, the population of cities greater than 100,000 people is less than 30% of the nation’s total.
If we take the list of US cities by population from Wikipedia, there’s 297 cities with a population greater than 100,000, and the total comes to 90.5 million, or 28.4% of the total US population. So far, the RBA’s numbers look spot on.
But any demographer worth their salt, or any competent person tasked with putting together a chart on urbanisation, knows that US urban populations are defined very differently than those in Australia.
Those numbers show that New York has a population of 8.5 million, which incorporates the five boroughs—Manhattan, Queens, Brooklyn, the Bronx and Staten Island. It ignores the 15m other people living in the greater New York combined statistical area.
So our US analyst Kevin Rose, who lives in Westchester County, a fairly densely populated suburban area 38 contiguously-settled kilometres from Central Park, is considered ‘non urban’ for the purposes of that RBA chart. Were he to live in less-densely populated Campbelltown or Cranbourne – 61 and 51 kilometres from the Sydney and Melbourne CBDs, respectively – he’d be considered ‘urban’.
Those numbers from which the RBA stats are derived also say that Los Angeles has a population of 3.9 million, making it smaller than either Sydney or Melbourne. Measured the way we measure city size, Los Angeles’ population is actually more like 18 million. Those that live in Santa Monica, LA’s equivalent to Bondi or St Kilda, are considered ‘non urban’ by the RBA’s numbers.
The most accurate like-with-like comparison is to use the combined statistical area of America’s largest cities, it’s the closest equivalent to how we measure city size in Australia. In that case, 239 million people live within the greater metropolitan area of cities greater than 100,000 people. That comes to 75.0% of the US population, very similar to Australia’s 77% and very different to the less than 30% claimed on the RBA chart. Is America also too urbanised to be susceptible to a housing crash?
And it’s not just the US numbers that are wrong. The chart show France’s population at about 15-16% ‘urban’. But more than 20% of France’s population resides in Greater Paris alone. I make the like-with-like number, for direct comparison with Australia’s, closer to 56%.
Does Australia have a housing bubble? I’ll leave that for others to argue. But if you’re relying on the RBA’s comparison of urbanisation around the world, or the multitude of media reports that have unquestionably replicated the claims, as an underpinning for high house prices, you’re relying on bad data. It’s chiefly a comparison of global urbanisation and Australian suburbanisation.
This chart was put together by clowns, not competent statisticians, and deserves to be appropriately derided.
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