The Reserve Bank has highlighted a new risk for Australia’s property market that could exacerbate house price falls.
The Reserve Bank of Australia has made a surprising admission that the crackdown on housing lending could crunch the economy, in what could be a hint that the bank will loosen up rules on investor lending.
By now, house price falls are part of the furniture. The price of an average home in Australia has been falling for many months. Prices are falling in city and country alike and very few locations have been experiencing strong growth. (Shout-out to the happy homeowners of Hobart, though!)
Many people think more price falls are guaranteed. We’ve seen predictions of 10 per cent falls, 20 per cent falls, even calamitous 30 per cent falls in total.
Everyone has an opinion. But one opinion on the housing market matters most: that of the Reserve Bank of Australia. It holds a lot of power It can let prices fall or step in at any time to give housing a boost.
So when the RBA gave a speech this week about housing lending policy, I was at full alert.
In his speech, the RBA deputy governor admitted a big new risk in the housing market. It wasn’t the one I expected. Not at all. What the RBA says it is worried about is property developers being unable to borrow money to start new projects.
The Reserve Bank has, for a long time, been talking about the property pipeline. As this next graph shows, thousands of new homes are being built — especially apartments in tall towers (included in the “higher-density” line at left).