BRISBANE (CU)_Australian households are among the most indebted by mortgages than any advanced economy, the Organisation for Economic Co-operation and Development (OECD) revealed. In its study, the Organisation analysed property prices from around the world over the past two decades and found that the rise in house prices in Australia amounted to a staggering 120 per cent, in real terms, after discounting inflation. This meant that the rise house prices in the Pacific nation was only behind New Zealand, Canada and Sweden.
According to the report, this current state of Australia’s property market is a result of low interest rates which have contributed to rising house prices and are further exacerbated by state and local government regulations. These restrictive regulations have been the reason why the supply of new housing failed to keep up with the demand from high population growth and strong immigration levels in the country, Luiz de Mello, director of policy studies in the economics department of the OECD, explained.
“Australia has high housing costs relative to incomes and house prices have increased very quickly over the last 20 years,” he said, adding that regulatory measures such as restrictive rezoning in major cities and land use regulations related to city planning have slowed the supply. “Greater flexibility in land use regulations and zoning such as height caps in cities, and the speed of administrative processes for construction, would make supply more responsive to the increase in demand,” he noted.
The report also found that in terms of household debt, out of the 28 countries that were analysed, Australians were the second-most indebted, with mortgage debt accounting for a share of more than 90 per cent of the economy. It also revealed that it takes six years longer than other countries to afford a home in Australia, with a disposable income of 16.4 years required for a 100-square-metre home in Pacific nation. This figure as an OECD average stood at 10.4 years.
