In July last year, the Reserve Bank of Australia (RBA) released a wonkish research paper that tried to argue that Australian housing was “fairly valued” compared to renting, based on a comparison of the financial cost of renting a home versus the cost of owning a similar dwelling, whereby the latter depends on the purchase price, real mortgage rates, repairs, council rates, transaction costs, and expected price appreciation:
There has been no clear tendency of Australian houses to be overpriced or underpriced, and the level of overvaluation, when averaged over a long time span, has been small.
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
