Strong growth in home values has made Australians ‘relatively wealthy’ – but Aussies hold a dangerously disproportionate share of their wealth in housing, warns Macrobusiness’ chief economist, Leith van Onselen.
Van Onselen tells Australian Broker mortgage affordability is improving, but remains poor on an overall level, while the proportion of household income ‘chewed-up’ by mortgage interest payments is 34% higher than in 1989, when mortgage rates peaked at 17%.
“Virtually all growth in housing values has come from land price appreciation, with land prices roughly doubling relative to GDP since the late-1980’s.”
Furthermore, argues van Onselen, Australia’s vacant land has become ‘prohibitively’ expensive, with all markets experiencing rapid price appreciation.
So how did we get here?