Properties 10pc too high

Properties 10pc too high

by 0 comments

Jessica Darnbrough

The International Monetary Fund has warned that Australian house prices might be overvalued by as much as 10 per cent.

According to the IMF's latest research, What Drives House Prices in Australia? A Cross-Country Approach, cyclical factors such as low interest rates, the commodities boom and disposable income levels have all contributed to inflated house prices, but their over-valuation appeared milder than in the past.

Price-to-income ratios - the proportion of income spent on housing costs - was high, above 10-year averages by about 20 per cent at the end of June, the fund's working paper said.

However, this over-valuation was similar to ratios appearing in New Zealand and Canada.

But while overvalued prices suggests some adjustment might be required, the IMF said high house values could be balanced by incomes and rents growing faster than house prices, migration and changes in terms of trade.

''Thus, a decline in house prices is only one way for the adjustment to occur, and the correction required in prices can occur gradually,'' it said.

That said, the IMF still warned authorities to "remain vigilant" to emerging risks given that household debt is relatively high at over 150 per cent of household disposable income.

 

Jessica Darnbrough

The International Monetary Fund has warned that Australian house prices might be overvalued by as much as 10 per cent.

According to the IMF's latest research, What Drives House Prices in Australia? A Cross-Country Approach, cyclical factors such as low interest rates, the commodities boom and disposable income levels have all contributed to inflated house prices, but their over-valuation appeared milder than in the past.

Price-to-income ratios - the proportion of income spent on housing costs - was high, above 10-year averages by about 20 per cent at the end of June, the fund's working paper said.

However, this over-valuation was similar to ratios appearing in New Zealand and Canada.

But while overvalued prices suggests some adjustment might be required, the IMF said high house values could be balanced by incomes and rents growing faster than house prices, migration and changes in terms of trade.

''Thus, a decline in house prices is only one way for the adjustment to occur, and the correction required in prices can occur gradually,'' it said.

That said, the IMF still warned authorities to "remain vigilant" to emerging risks given that household debt is relatively high at over 150 per cent of household disposable income.

 

promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2017

With a combined sales volume of over $14 billion in 2017, the Top 100 Agents ranking represents the very best sales agents in Australia. Find out what sets them apart and learn their secrets to success.

featured podcast

featured podcast
How this agent grew his database by 50% in five years

In this episode of Secrets of the Top 100 Agents, Robert Pignataro joins host Tim Neary to explain how he increased his personal database by...

View all podcasts

Does the benefit of being part of a branded group outweigh the cost?

Yes
No
Depends on the group
Do you have an industry update?