Australian property undervalued by 30%
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Australian house prices are 30% undervalued compared with the cost of renting, according to new research.
Financially, Australians would be better off buying a house than renting, said Reserve Bank of Australia economist Peter Tulip.
Mr Tulip said low interest rates made it the best time in 30 years to buy rather than rent, local media reported.
His comments come at a time when house prices in Australia’s capital cities are out of reach for many Australians.
Prices for Sydney residential property are so high some people have predicted the market will bust.
Mr Tulip said his findings were based on changes in bond prices which implied mortgage rates would remain at record lows for a further decade.
The Reserve Bank kept Australia’s official cash rate steady, this week, at a record-low of 2%.
Mr Tulip presented the preliminary research at a Queensland conference on Wednesday.
Better value
A year ago the cost of renting was similar to the cost of regular mortgage repayments, Mr Tulip said.
“What has changed since then is that real long-term interest rates have fallen substantially,” he said, according to Fairfax Media.
“That fall made housing more attractive relative to renting, despite the increase in prices,” he said.
His research found that the annual cost of owning a home bought in April was likely to be 2.7% of its value, while the annual cost of renting the same home was likely to be 3.9%.
Meanwhile, separate data published by Domain Group showed rental costs had continued to rise in nearly every Australian capital city.
The median weekly rent for a Sydney house was A$530 ($393, £256), up 1.9% over the past quarter.
Over the past 12 months, house prices in Sydney had risen 16.2%, in Melbourne they were up 10.2% while average prices in other capital cities had risen by 9.8%, according to Fairfax Media.
