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Household debt, housing prices and resilience

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  • Lowe, Philip

Abstract

Recent rises in the ratio of Australian housing prices and household debt have become an issue of public debate. This paper outlines the Reserve Bank of Australia’s investigation into this issue. Three areas are examined: aggregate trends in housing prices, debt and household incomes; the distribution of household debt and their effect on the economy as a whole. It is found that part of the cause of the rising ratio of house prices to household debt has been a recent slowdown in household income, strong demand from overseas buyers and strong population growth. While borrowing has added to the upward pressure on prices the underlying cause is embedded in the supply–demand dynamics. It is concluded that the recent increase in household debt relative to incomes has made the economy less resilient to future shocks.

Suggested Citation

  • Lowe, Philip, 2017. "Household debt, housing prices and resilience," Economic Analysis and Policy, Elsevier, vol. 55(C), pages 124-131.
    • Handle: RePEc:eee:ecanpo:v:55:y:2017:i:c:p:124-131
    DOI: 10.1016/j.eap.2017.05.007
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    References listed on IDEAS

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    1. Helen Hughson & Gianni La Cava & Paul Ryan & Penelope Smith, 2016. "The Household Cash Flow Channel of Monetary Policy," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 21-30, September.
    2. Marion Kohler & Michelle Van Der Merwe, 2015. "Long-run Trends in Housing Price Growth," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 21-30, September.
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    Cited by:

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    2. Deng, Xin & Yu, Mingzhe, 2021. "Does the marginal child increase household debt? – Evidence from the new fertility policy in China," International Review of Financial Analysis, Elsevier, vol. 77(C).
    3. Squires, Graham & White, Iain, 2019. "Resilience and housing markets: Who is it really for?," Land Use Policy, Elsevier, vol. 81(C), pages 167-174.
    4. Suhal Kusairi & Suriyani Muhamad & M Musdholifah & Shu-Chen Chang, 2019. "Labor Market and Household Debt in Asia Pacific Countries: Dynamic Heterogeneous Panel Data Analysis," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-15, June.
    5. Lisa Adkins & Melinda Cooper & Martijn Konings, 2021. "Class in the 21st century: Asset inflation and the new logic of inequality," Environment and Planning A, , vol. 53(3), pages 548-572, May.
    6. Linyan Wang & Haiqing Hu & Xianzhu Wang & Xincheng Zhang & Hao Sun, 2022. "Spatiotemporal Evolution and Cause Analysis of Urban Housing Investment Resilience: An Empirical Study of 35 Large and Medium-Sized Cities in China," Land, MDPI, vol. 11(10), pages 1-20, October.
    7. Ms. Elena Loukoianova & Yu Ching Wong & Ioana Hussiada, 2019. "Household Debt, Consumption, and Monetary Policy in Australia," IMF Working Papers 2019/076, International Monetary Fund.
    8. Abd Samad, Khairunnisa & Mohd Daud, Siti Nurazira & Mohd Dali, Nuradli Ridzwan Shah, 2020. "Early Warning Indicators for Systemic Banking Crises: Household Debt and Property Prices," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 54(1), pages 121-134.

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