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Oliver's Insights – Australian house prices – overvalued but undersupplied

This note looks at the outlook for Australian house prices.

The key points are are as follows:

- Australian housing remains very expensive, but undersupply continues to be an issue. Worsening affordability is likely to constrain average house price growth to around 5% over the year ahead.

- Expensive housing and high household debt levels are a risk for the Australian economy. However, in the absence of higher unemployment, much higher interest rates or a big supply increase, a US-style collapse in Australian house prices is unlikely.

- The best outcome in terms of defusing the issue of high household debt levels and poor affordability would be to have several years of average house price growth running below growth in household income.

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