The Reserve Bank of Australia is warning that property prices could begin to shoot upwards into unaffordable territory.
Speaking at the fifth annual Citi Annual Australian and New Zealand Investment Conference yesterday, RBA governor Glenn Stevens said the Reserve would be keeping a close eye on credit growth.
“While overall credit growth remains low at present, borrowing is increasing quite quickly in some pockets,” Governor Stevens said.
“Investor participation in housing in Sydney, in particular, is becoming noticeably stronger. Over the past year, the rate of finance approvals for this purpose has increased by 40 per cent.
“We have certainly experienced higher rates of growth of finance than that in the past, and it may be that we are seeing some catch-up from a delayed initial response to fundamentals favouring more investment in housing.”
Mr Stevens went on to warn lenders and borrowers alike that if this activity were to continue, that they should take due care.
“It is very important that strong lending standards remain in place, and that decisions be based on sensible assumptions about future returns.
“That's what we need if we are to experience a long and sustainable expansion in housing investment that houses our growing population at acceptable cost, and pays reasonable returns on the capital deployed.
“That's the sort of outcome we want, as part of the more balanced growth path for the economy we are seeking over the years ahead.”