There is only one country in the world where house prices have increased more rapidly than Australia, according to new report from real estate firm CBRE, which charts the performance of the property market in cities all over the world.
Over a 30-year period, prices in Australia have increased 221.4%; UK prices rose 231.9%.
In contrast the US market has seen price rises of just 53.2%; mainland Europe’s biggest economy Germany has seen prices decline 7.8% over the period; Japan is down 14.5%. Population growth, immigration and under-supply of housing are all factors in the Australian price rises.
Meanwhile, according to the Reserve Bank, the momentum in the Australian housing market is having a positive effect on consumer consumption which will eventually lead to a pickup in business investment.
“The low level of interest rates and strong population growth are expected to continue to underpin rising housing activity and housing prices,” said the RBA.
“These, in turn, are expected to support consumption through their effect on household incomes and household wealth. In time, a pick-up in household demand should support higher business investment in the non-mining sector.”
Although recent reports suggest that the housing market may be beginning to stagnate, the Reserve Bank expects growth in the housing market to continue its momentum into next year, particularly for investors.
“Strong growth in dwelling investment is likely to continue, as evidenced by the high level of building approvals and strength in other forward-looking indicators.
“Conditions in the established housing market also remain strong. Housing price growth has slowed from the rapid pace of late last year, but is still quite high in Sydney and Melbourne.”
The Australian dollar still remains high, however, despite the recent depreciation of the exchange rate. As a result, the exchange rate is offering less assistance than would normally be expected in achieving balanced growth in the economy.
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