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The Australian housing market – understanding the causes and effects of rising prices

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  • Mohammad Rahman

Abstract

This article analyses current housing market conditions in Australia; specifically the factors that have caused increased housing prices in recent years and their implications. The article finds that the number of home owners with a mortgage and the number of renters have increased. For owners with a mortgage, average housing costs escalated substantially. Interest rates, investment demand, economic climate, financial deregulation and innovation, land supply and the land-use planning system, government taxes, levies and charges, demography, economic growth and wealth effect all play a vital role in influencing housing prices. Rising house prices positively impact on home owners' wealth, aggregate demand, employment and real GDP, and reduce affordability of first-home buyers and wellbeing of Australians in aggregate. It is argued that increasing the supply of housing, approval of tax-free savings for first-home buyers, regional development and reduction of government taxes, levies and charges should be the focus of future policy development to redress these problems.

Suggested Citation

  • Mohammad Rahman, 2010. "The Australian housing market – understanding the causes and effects of rising prices," Policy Studies, Taylor & Francis Journals, vol. 31(5), pages 577-590.
    • Handle: RePEc:taf:cposxx:v:31:y:2010:i:5:p:577-590
    DOI: 10.1080/01442872.2010.497261
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