Australian Housing Market: Not Nearly as Risky as Reported - Property Inc

Australian Housing Market: Not Nearly as Risky as Reported

The International Monetary Fund (IMF) has ranked Australia as the second-highest country for “housing market risk” out of 27 countries, behind only Canada. While some experts agree with the IMF report’s importance, they argue that Australia’s housing market is not as risky as it has been depicted.

According to an article in The New Daily, head of residential research at CoreLogic, Eliza Owen, argued that the IMF report has raised concerns about the risk the Australian housing market carries. However, there is “room for cautious optimism”. Many households have strong savings buffers through the low interest rate period, and labour markets remain tight. Housing market conditions are turning a corner amid low stock levels, rising demand from overseas migration, and consumer sentiment shifting higher as the rate-tightening cycle ends.

Owen highlighted five different measures of housing market risk, including outstanding housing debt to household income in June last year, the share of housing debt on variable interest rates, the share of home owners with a mortgage, cumulative cash rate changes from March 2020 to September 2022, and real house price growth between March 2020 to March 2022.

Despite the high levels of debt compared to income, Owen explained that outstanding housing debt represented just 17.6% of the asset value at the end of 2022. She said it’s important that Australian unemployment remains contained to underpin mortgage serviceability.

Moreover, Owen argued that the rapid rate increases have not yet fully been passed on to fixed-rate holders, or even variable-rate holders. She added that there has already been a sharp decline in home values, but limited increases in home loan defaults or forced sales.

In an opinion piece in The Sydney Morning Herald, Gareth Hutchens stated that property price inflation has killed the Australian Dream of widespread home ownership for younger generations. Hutchens also highlighted that since the early 1990s, the value of our dollar hasn’t been maintained in every market. When it comes to the property market, it’s been obliterated. A unit of currency is worth far less in modern housing markets than it was in post-war housing markets.

Hutchens raised the question of whether policymakers should index wages to property prices, to give younger generations a chance. He highlighted that one of the Reserve Bank’s main jobs is to maintain the stability of Australia’s currency. The Reserve Bank Act 1959 states that the bank has three main objectives, including “the stability of the currency.” However, Hutchens pointed out that in some of the RBA’s modern educational material, the bank has replaced the phrase “stability of the currency” with “price stability.”

In summary, while Australia’s housing market is not without risk, experts argue that the IMF report’s depiction is overly pessimistic. Some Australians have strong savings buffers, and the housing market conditions are turning around, with rising demand from overseas migration and consumer sentiment shifting higher. However, younger generations are struggling to afford housing, and policymakers need to consider measures that give them a chance. The Reserve Bank’s role in maintaining the stability of the currency, whether it means exchange rate stability or domestic inflation, will feed into promoting the economic prosperity and welfare of all Australians.


Torrazo, Z. (2023, April 17). Is the Australian housing market truly at ‘high risk’? The New Daily.

Hutchens, G. (2023, April 19). An Australian dollar buys increasingly less in the property market — a colossal failure of policy. The Sydney Morning Herald.

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