There is mounting concern in Australia about the nature and extent of country’s housing affordability crisis. Expressions of distress are not limited to the middle income households who are locked out of the Great Australian Dream of home ownership. There is heightened interest from advocates of low income households and an opposition political party. Moreover, Australia’s overvalued housing is receiving renewed attention in international circles.
The extent of the house price increases is starkly illustrated by comparing the value of the own housing stock to the gross domestic products of Australia and the United States since 1988 (the first year for which Australian house value data is readily available).
According to data from the United States Federal Reserve Board, the value of the US stock of owned housing in 2010 was approximately the same in relation to the Gross Domestic Product as it was in 1990. On the other hand data from the Reserve Bank of Australia indicates that the value of the own housing stock in Australia was 85 percent higher relative to the Gross Domestic Product than in 1990. Thus, the value of the owned housing stock in Australia is today at least $1.9 trillion greater than it would have been if the 1990 ratio had been retained (Figure 3).