CHART OF THE DAY: No Bubble In Housing, Prices Will Continue To Rise

Now here’s an interesting chart.

Apparently Australian housing is not as unaffordable as many have been lead to believe, according the ANZ’s economics team. Indeed this chart shows there is still room for significant house price rises.

The ANZ says that the normal discussion about housing affordability which focuses on price to income ratios is flawed because, house price to income and rental yield analyses tend to ignore the structural fall in interest rates that has occurred over recent decades which has (quite reasonably) been capitalised into house prices.

In the end the ANZ concludes that:

despite increasingly difficult home deposit affordability (especially for first home buyers), Australian house prices are not only sustainable (supported by improved loan affordability, solid economic fundamentals, a stable mortgage market, strong investor demand and a significant pent-up demand for homes) but are likely to continue to rise in line with growth in average household incomes in the medium-term.

There we have it – no bubble and prices which will continue to rise. Good news for the economy.

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