Housing Debate

By July 15, 2014 No Comments

The debate on the housing sector saw the RBA weigh in with a discussion paper released yesterday that interestingly evaluated the issue of housing prices not against the usual household income test but compared to the rent/buy option under various real house price appreciation rates.  In short if “real” house prices appreciate at their average since 1955 (2.4% p.a) then occupants should be indifferent to buying or renting whereas if real house prices appreciate at a lower rate (say 1.7%) then households are better off renting.  Of course if all households opted for the rent option it could put the merits of this rationalist economic argument on its head.  Can you imagine the new dinner party chat about who is paying the most rent?

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