Regulator warns about property bubble

Regulator warns about property bubble

20 May 2015 by Katarina Taurian 0 comments

Financial regulator ASIC has expressed concern about the “historic highs” of the Sydney and Melbourne property markets.

ASIC chairman Greg Medcraft said the heated property markets in Sydney and Melbourne have the characteristics of a bubble, according to Fairfax reports.

Mr Medcraft said the SMSF sector is of specific concern, and warned investors against borrowing to invest in the current market.

While the current interest rate environment is clearly fuelling investors’ appetites, he stressed that rates will not stay at these historic lows for the long term.

"History shows people don't know when they are in a bubble until it's over,” Mr Medcraft said.

"There is always danger when rates get so low. That's when people start borrowing when they can't afford it.

“What generally happens is rates start to rise, which affects your ability to pay, and rate rises can actually bust a bubble so you end up with a double whammy.”

ASIC is continuing to target SMSF property spuikers through a dedicated taskforce and recently stressed that property spruiking is the “largest concern” facing the SMSF sector.

[Related: Sharp Sydney decline could be on the cards]


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