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14-07-2014, 04:08 PM
Home buyers could be better off renting: RBA
JULY 14, 2014 3:30PM
Elizabeth Redman
Business Spectator Reporter
Melbourne
The average home buyer would be better off renting if house price growth slows below its long-term average, according to the Reserve Bank of Australia.
The central bank said if real house prices continue to grow at the average rate of the past six decades, then buying a house now would be about as costly as renting.
But the RBA noted some forecasters' predictions that house price growth could ease, meaning the average household would probably find it cheaper to rent than buy.
In a research paper, the RBA said expectations of future capital gains implied by current house prices are in line with historical norms.
"That allays some concerns about a housing 'bubble'," the Reserve Bank said.
The paper said real house prices have increased at an average annual rate of slightly less than 2.5 per cent since 1955.
"If this rate of appreciation is expected to continue then our estimates suggest that houses are fairly valued," it said.
But the central bank warned that forecasting house price growth was subject to considerable uncertainty.
JULY 14, 2014 3:30PM
Elizabeth Redman
Business Spectator Reporter
Melbourne
The average home buyer would be better off renting if house price growth slows below its long-term average, according to the Reserve Bank of Australia.
The central bank said if real house prices continue to grow at the average rate of the past six decades, then buying a house now would be about as costly as renting.
But the RBA noted some forecasters' predictions that house price growth could ease, meaning the average household would probably find it cheaper to rent than buy.
In a research paper, the RBA said expectations of future capital gains implied by current house prices are in line with historical norms.
"That allays some concerns about a housing 'bubble'," the Reserve Bank said.
The paper said real house prices have increased at an average annual rate of slightly less than 2.5 per cent since 1955.
"If this rate of appreciation is expected to continue then our estimates suggest that houses are fairly valued," it said.
But the central bank warned that forecasting house price growth was subject to considerable uncertainty.