Housing prices and policy dilemmas: a peculiarly Australian problem?

House price inflation has a long tradition in Australia. By international standards the current housing boom is world class. Australia, along with Britain, heads the OECD league table for house price increases. This article first describes the boom in Australian house prices, distinguishing the differences across geographic and dwelling type sub-markets. The drivers behind these changes are then discussed, ranging from short-term factors like interest rate levels and investor behaviour to longer-term factors like economic growth and demographic change. Institutional influences, notably tax regimes and land-use planning regulations, are also addressed. The article then considers the tendentious but timely question 'is Australia experiencing a speculative housing investment bubble and, if so, will it burst?' The article goes on to consider what the consequences or costs might be, in terms of the broader issues of macroeconomic policy.