Record low interest rates in Australia haven’t led to a property bubble, according to the banking industry.
In fact, Australian property prices rank well down on a global scale, they say.
The Australian Bankers’ Association today released a report, Key truths on housing in Australia, which looks at the changes in house prices over the past quarter of a century.
“Our analysis shows that the recent rise of house prices in Australia is not unusual when compared with historical trends, and the current house price growth has not exceeded the peak rates we saw before the global financial crisis,” says association CEO Steven Münchenberg.
After adjustment for inflation, rises in Australia have ranked behind Hong Kong, Switzerland, Austria, Germany and Canada, as the chart on the right shows.
The bankers association says Australia has recorded solid increases in both nominal and real house prices since the GFC but has not been the strongest market in global terms.
“Since the GFC, volatility in prices has increased, with two periods of quite marked national declines in prices followed by strong rebounds,” says Münchenberg.
“Much of the recent focus has been on strong house price growth in Sydney, but over the past ten years the price increase in Sydney is unremarkable when compared to other capital cities.”
While low interest rates are the primary driver of house prices, the report shows, they are also contributing to the strong state of household finances.
“The value of household assets is greater than the value of household debt – for every $1 of debt held by Australian households today, they have almost $6 of assets. Additionally, latest figures show that households are, on average, 21 months ahead of their scheduled mortgage repayments,” Münchenberg says.
He says this indicates that households are on average well placed financially to withstand an increase in interest rates or other event that may cause increased financial pressure.
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