The Reserve Bank has pointed to recent downturns in the Australian property market as evidence that rising house prices cannot continue forever.
Speaking at the Australian Housing and Urban Research Institute (AHURI) Panel Roundtable in Sydney this week, RBA head of financial stability Dr Luci Ellis said Australia is not actually one of the ‘boomier’ places over the last ten years.
“House prices have risen faster than consumer prices, but they haven’t risen materially faster than household incomes in Australia,” she said.
Dr Ellis pointed to the years 2004, 2009 and 2011, where Australian house prices fell relative to consumer prices.
Nationally, house prices fell in absolute terms in 2009 and for an extended period in 2011, while in Sydney they fell in all three occasions on a year-end basis.
“This is not a country where we haven’t experienced house price falls,” Dr Ellis said.
“We have experienced house price falls; there is risk in the system that people have experienced,” she said. “It is simply incorrect to treat the Australian history as if there has never been any kind of downturn.”
One silver lining to come out of the GFC is that we now have more data on housing, Dr Ellis said; however the failure by many international policymakers to use recent data has been “disappointing”, she added.
“Policymakers and international agencies are much more focused now on the risks from housing than they were in the past so they want more data, and there have been a huge number of international initiatives that have been put forward.”
Such initiatives include G20 Data Gaps Initiative (DGI), the Bank for International Settlements (BIS) new housing price database and the IMF and OECD collecting rent- and price-to-income ratios.
“The important point is that updating some of the numbers for the last five years changes a lot of perspectives,” Dr Ellis said.
“A lot of the international conversations around housing really haven’t caught up with the last five or six years of data, which is quite disappointing,” she said.