Australian house prices are as undervalued by as much as 30 per cent, making the decision to buy more attractive relative to renting than at any time in the past 30 years, research conducted within the Reserve Bank of Australia has found.
It meant current house buying price expectations are not “irrational” or “unusual”, the research by RBA senior research manager Peter Tulip and co-author Ryan Fox found, according to Fairfax Media.
On an annual basis, “you can either pay 2.7 per cent of the value of the property to buy, or you can pay 3.9 per cent of the value to rent," Dr Tulip said, according to Fairfax Media. "The undervaluation is 30 per cent."
Mr Tulip delivered the preliminary findings at the Australian Conference of Economists in Brisbane this evening, emphasising that they should be attributed to him and not the central bank.
The calculations were based on recent lower mortgage prices and signals from the bond market that mortgage rates will remain in the vicinity of their present lows for another decade.