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Houses overvalued by 15%: IMF
Released 24 November 2010

Australian house prices could be overvalued by up to 15 per cent, which would leave indebted households vulnerable in the event of a property market slump, according to the International Monetary Fund (IMF).  

Ray Brooks, Mission Chief for Australia, says an IMF report on the rise of Australian house prices over the past 20 years will show “moderate” overvaluation of five to 15 per cent. The report examines long-term drivers including population and income growth.

Ray adds that households with high debt levels would be hardest hit should prices decline.

“There is a risk that a decline in house prices, if it were particularly sharp, could have some impact on household spending and could force some households to reduce their high levels of debt,” he says.

Alternatively, continued growth in income and population could keep house prices near their current levels, Ray explains. “You’ve got continuing strong population growth in Australia and continuing income growth, so that’s a possibility.”