As Australians become wealthier and the economy grows, high housing prices are expected to stay.

According to the Australian Bureau of Statistics, household net wealth rebounded by 8.0 percent in September or about US$3,000 per person to US$44,000 although the figure is still lower from 2007 levels prior to the Global Financial Crisis.

"Australian households have plenty to cheer about with wealth levels repairing in the September quarter," Commonwealth Securities economist Savanth Sebastian told The Sydney Morning Herald, adding that he thinks there will be more improvement in the December quarter.

A recent International Monetary Fund (IMF) report concluded that Australian house prices were already overvalued but found a connection between increasing house prices and improving trade performance. "The current historically high terms of trade are expected to be long lasting," the IMF report said. "Strong population growth and high real income growth in the wake of record-high commodity prices this year will continue to support house prices."

It added: "The increasing scarcity of land in main urban centers in Australia is an important factor.”

The Australian economy has been on a high note due to robust demand for its exports from China and India. ANZ Property research head, Paul Braddick says the IMF report does not consider other factors influencing housing prices namely capital gains tax, negative gearing and rental yields.
"Conclusions drawn from restricted models therefore need to be treated with a degree of caution," Braddick added.
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