Dwelling Prices and Household Income

The purchase of a dwelling is, for many households, the largest financial decision they will make, and their home is their most valuable asset. Household net worth is therefore closely linked to dwelling prices, while a sizeable share of household income is devoted to mortgage interest payments. Developments in the housing market can also have significant effects on the wider economy, while residential mortgages constitute the majority of Australian banks’ assets, making a sound housing market important for financial stability. More broadly, dwellings are valuable as they provide an essential service – that of shelter – so the affordability of housing has important implications for welfare. For all these reasons the Reserve Bank analyses the housing market and tracks various housing market indicators, including prices, auction clearance rates, turnover and arrears.