The Reserve Bank of Australia has praised Australia’s housing market at an overseas conference but also warned the good times won’t last forever.
Governor Glenn Stevens told a Hong Kong investment conference earlier this week that the Reserve Bank saw “abundant signs of confidence in the housing market”.
“Dwelling prices have seen a broad-based rise of 10 per cent in the past year and are now about five per cent above the previous peak in 2010,” he said.
However, Mr Stevens warned there might be an increase in speculation and household debt if people started assuming that strong price growth was normal.
“We are watching this closely, and we remind people that house prices can go down as well as up. In fact there have been two episodes where prices fell for a year during the past decade,” he said.
The Reserve Bank emphasised the point in its most recent Financial Stability Review, which was released on the same day as the conference.
Borrowers were warned that “a cyclical upswing in housing prices when interest rates are low cannot continue indefinitely”.
The Reserve Bank also warned that household gearing and indebtedness remain near historically high levels.
“The continued low interest rate environment, together with rising asset prices, has encouraged a shift in households’ preferences towards riskier, and potentially higher-yielding, investment options,” according to the Reserve Bank.
“In particular, there has been a marked pick-up in housing loan approvals to investors, as well as to repeat-buyer owner occupiers, although there may be some misreporting that is suppressing indicators for the first home buyer category.”