Interest rates influence property prices, but they are not the reason that Australia has some of the highest housing values in the world, Philip Lowe said in a speech just before standing down as Reserve Bank governor.
Mr Lowe said it's true that the lower interest rates that Australia has experienced for much of the past 30 years have contributed to the increase in property prices.
"But the reason that Australia has some of the highest housing prices in the world isn’t interest rates, which have been at roughly similar levels across most advanced economies. Rather, it is the outcome of the choices we have made as a society: choices about where we live; how we design our cities, and zone and regulate urban land; how we invest in and design transport systems; and how we tax land and housing investment," he said.
"In each of these areas, our society and politicians have made choices that lead to high urban land and housing costs. It is by tackling these issues that we can address the high cost of housing in Australia, which I view as a serious economic and social problem."
The federal government's Home Guarantee Scheme (HGS) is helping first home buyers on modest incomes enter the market with small deposits, according to research commissioned by the National Housing Finance and Investment Corporation.
Some of the key findings from the research were:
Under the HGS, first home buyers can enter the market with just a 5% deposit – but conditions apply. I can tell you whether you’re eligible and help you apply for a loan.
The combined value of Australian real estate reached $10 trillion at the end of August, according to CoreLogic, which is the first time it's reached this level since June 2022.
The increase resulted from a combination of more properties being built and the value of Australia's housing increasing.
Soon after reaching the $10 trillion mark last year, the property market began a 10-month downswing, during which the national median property price fell 9.1%. Since March, prices have risen in six consecutive months, increasing by a combined 4.9%. However, the outlook is uncertain, according to CoreLogic.
“While there is a growing expectation that the RBA board is done hiking the cash rate, borrowing remains constrained by a relatively high serviceability buffer,” CoreLogic said.
“APRA [banking regulator] data to June showed the weighted average home loan assessment rate was just below 9%, and Australian Bureau of Statistics housing lending data shows mortgage lending has fallen for three of the past four months.”
Rachael Bland – Founder & CEO