Housing prices and rents in Australia 1980-2023: Facts, explanations and outcomes

Vol: 
14/2023
Author name: 
Abelson, P
Joyeux, R
Year: 
2023
Month: 
October
Abstract: 

Nationally, real median house prices approximately doubled between the early 1980s and 2003 and again between 2003 and 2022. And there was a strong uniformity of housing price changes across Australia. Accounting for quality changes, real house prices rose by about 50% between 2003 and 2022. On the other hand, constant quality real housing rents rose by only about 20% from 1980 to end 2022. Our long-run equilibrium house price model shows the impacts on house prices of changes in mortgage rates, real household disposable income and the national housing stock. Our error correction model finds that if an external shock throws the variables out of equilibrium, the price adjusts to the long-run equilibrium with about 11 per cent of the adjustment occurring in each quarter. Housing ownership has fallen substantially for households under 55 due in part to the rising cost of first home deposits, but average mortgage payments have not risen as a proportion of average household income. Rents have been a broadly constant proportion of household disposable income. However, many low-income households pay more than 30% of their disposable income because household incomes are distributed more widely than house rents. There has also been a major fall in the supply of public housing.

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