Global Power | Local Knowledge | Uniquely Personal
中文

OECD issues house price warning

OECD issues house price warning

The Organisation for Economic Cooperation and Development (OECD) has issued a warning about the soaring house prices in Australia, highlighting fears that the boom could signal the start of an economic downturn if prices continue to remain unaffordable. 

The OECD assessed the country's overall economic stability as robust and healthy, but warned about the perils of spiralling house prices. It said that the ever-increasing cost of property could lead to a drop in consumer spending and also lead to people defaulting on mortgage payments. 

The report said that personal and household debt in Australia has reached "unprecedented highs". It added that this can have a significant knock-on effect for the rest of the economy.

"A continued rise of the market, fuelled by both investor and owner-occupier demand, may end in a significant downward correction that spreads to the rest of the economy," the report warned.

The body also highlighted the problems for first-time buyers, particularly for those looking to purchase a property in Sydney. Even though the sharp increase in property prices seems to be slowing a little, the price to income ratio is still considerably skewed. 

The OECD, a Paris-based institution, also said that the Australian economy is robust enough for banks to cut interest rates even further, making it more affordable for people to take out a mortgage. 

The overall fiscal outlook for the country remains largely positive. It predicts the economy will grow by 2.6 per cent this year, with next year looking even healthier with a growth rate of 3.1 per cent. These figures are in stark contradiction to 2016 when growth slowed. Last year's annual increase was a weak 2.4 per cent - unusually low for a normally vibrant and reliable economy. 

Unemployment is also predicted to fall by 0.3 per cent next year.

All information provided is of a general nature only and does not take into account your personal financial circumstances or objectives. Before making a decision on the basis of this material, you need to consider, with or without the assistance of a financial adviser, whether the material is appropriate in light of your individual needs and circumstances. This information does not constitute a recommendation to invest in or take out any of the products or services provided by SMATS Services (Australia) Pty Ltd or Australasian Taxation Services Pty Ltd.

Subscribe Now