The great Australian housing rip-off

The eagerness of Australian banks to lend has widened the house price-to-income ratio. For many young people today it makes little financial sense to leave the rental market.

Owning your own home remains a dream for many Australians, but an increasingly difficult one. In our pursuit of home ownership we are frequently ripped off, with new evidence from the Reserve Bank of Australia suggesting that housing is severely overvalued. Combined with a soft economic outlook, younger Australians would be well advised to think hard before taking on excess leverage, borrowing from their parents and entering Australia’s housing market.

The RBA released an interesting research paper yesterday on housing valuation by economists Ryan Fox and Peter Tulip. They ask the pivotal question: Is housing overvalued?

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