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The housing market is not the economy

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It's hard to go more than a day or two without reading a worrying headline about the housing market's woes, led by price falls in Sydney and Melbourne.

Given all the public attention property attracts, this might leave you thinking that the economy's fate is inextricably tied up with what happens to the price of bricks and mortar.

The falls in national capital city house prices are the sharpest in the post-WWII period, says NAB economist Kieran Davies.Credit:Louie Douvis

However, this would be misguided.

It's true that swings in the housing market can have important implications for the financial system and the economy.

The media also pays lots of attention to housing because, for so many people, it is their biggest asset.

However, the property market is not the economy, and what's going on in housing is probably not always as economically important as you might think.

First, it helps to put the recent fall in property prices into perspective.


© Brisbane Times