Within the last few decades in particular, House prices in Australia and the world have increased, largely due to inflation and population growth. Melbourne’s median house price has soared to $843,674 in march compared to $811,674 in the previous quarter; a large increase in such a shot given time period. Prices have risen every quarter for almost 5 years. The average price of houses in Melbourne has risen by more than $110,000 from March last year, and median house prices have more than doubled in a decade ;In 2007, the median house price was $386,411), the key driver to these changes is Melbourne’s population boom, and even though rising house prices is a win for homeowners, not everyone selling their property is feeling rich, as the problem is when your house value goes up, the costs of everything else also increase alongside it. This effect can have problems, where homeowners who’s property value has increased feel a false sense of optimism and wealth, known as the “Wealth effect”
For example, a Mrs Sallows, who believed that the market was booming, decided to sell her house for 1.7 million dollars; Soon after selling her house, she wasn’t even sure if she could even afford another house in the same area, this is a real life example of the “Wealth Effect” Rising house prices have been a big issue in recent years.
How do you think this can be resolved?