Two leading property economists claim that Australia is in the midst of a housing sector bubble of unprecedented proportions, threatening to cause nationwide economic calamity upon its collapse.

Lindsay David and Philip Soos of LF Economics assert that Australia currently suffers from a perilous oversupply of housing that is the result of a “perverse” cultural obsession with home ownership, in tandem with a “degenerate” taxation system and rampant speculative behaviour.

In a submission made to a parliamentary inquiry concerning home ownership, David and Soos claim the present bubble is worse than any of its predecessors over the past century and a half, having first commenced nearly two decades ago and currently affecting all of the country’s major cities.

“These metrics point to the beginning of the housing boom in 1996 and peaking in 2010, though the latest booms in Sydney and Melbourne could result in posting new peaks in terms of the [price-to-rent] ratio,” wrote the two economists.

“Housing prices across all capital cities remain grossly inflated relative to rents, income, inflation and GDP…the largest residential land market bubble on record is truly incomparable and dwarfs earlier speculative episodes in the commercial and industrial land market.”

According to the two economists, a crash in the housing market is all but inevitable, although the specific event that will serve to trigger this collapse “is not yet known.”

“A bloodbath in the housing market…appears a near certainty due to the magnitude of falls required for housing prices to again reflect economic fundamentals.”

The problem of oversupply is particularly acute in Victoria, with rents in Melbourne failing to post significant gains over the past five years despite a surge in real housing prices.

David and Soos predict the Victorian capital will serve as the tipping point for imminent collapse in the Australian housing market.

“Melbourne is primed to become the epicentre of a legendary housing market crash due to a combination of a staggering boom in real housing prices (178 per cent,)” said the submission.

According to the two economists, Perth’s housing market is already in the doldrums following the mining boom’s demise.

“Perth is also in a serious predicament following price stagnation and substantial net income losses since the market peaked in [Q1 2007,]” they wrote. “On average, investors purchasing after the peak have lost in terms of both prices and rental income.”

David and Soos foresee a downturn in the housing markets of Australia’s other major cities, although it will likely not be as severe as those besetting Melbourne and Perth.

They pin the blame for what they call “the largest debt-financed real estate bubble in Australia’s history” on the country’s cultural obsession with home ownership, as well as a tax system that creates a warped set of incentives.

“Property ownership and speculation has been elevated to the status of religion in Australia, compounded by a perverse culture of homeowner entitlement driven by a degeneration taxation system that penalises work and effort while rewarding unearned wealth and income,” they stated.

According to the two economists, the very inquiry to which their submission has been made is actual a smokescreen that distracts from the urgent need for widespread political reform, which they consider to be the only effective remedy for the prevailing malaise in the Australian economy.

“This latest housing inquiry is a transparent political ploy to avert implementing a raft of genuine policies that would impinge upon the government-supported ability of the FIRE (finance, insurance and real estate) sector to siphon record-breaking profits from the economy and labour through the extraction of economic rents, primarily usury and land rent,” they wrote.