Understanding Housing Affordability in Australia

Abstract We evaluate housing affordability in Australia particularly as it relates to the ability of households to purchase a home. An overview of trends in the Australian housing market is provided with a discussion of rising house prices and falling home ownership. We then provide an estimate of the fundamental price of housing at capital‐city level based upon the user cost of housing. We also discuss policies that have been used and policies that could be used to improve housing affordability. We conclude with a brief discussion of the long term barriers to housing affordability.