Tuesday 21st April 2015 - 12:31 pm

Property price survey supports RBA chief’s caution

by Alan Thornhill

The Reserve Bank Governor, Glenn Stevens, says Australians may have been focusing too closely on “exuberant” Sydney house prices.

And a new property price survey, by the National Australia Bank, added weight to his remarks.

Addressing the Australian American Association in New York, Mr Stevens said housing market developments in other capitals should not be overlooked.

He said home prices had also “risen considerably from their previous lows,” at a national level, even though income growth had been slowing.

“Popular commentary is, in my opinion, too focused on Sydney prices and pays too little attention to the more disparate trends among the other 80 per cent of Australia,” Mr Stevens said.

But he admitted that the Reserve Bank, too, is watching the Sydney housing market closely.

“… it is hard to escape the conclusion that Sydney prices – up by a third since 2012 – look rather exuberant,” Mr Stevens said.

Meanwhile, a new survey showed that foreign investors now account for 21 per cent of new home purchases in NSW.

The National Australia Bank, which conducted the survey, described this as “a new high.”

The bank’s Chief Economist, Alan Oster, also said the bank’s survey showed that home prices in NSW are expected to rise by another 3.3 per cent over the coming 12 months.

It reinforced Mr Stevens’ remarks.

Mr Oster said:”While expectations for national house prices strengthened over the next 1-2 years, the picture remains quite mixed across states.

“Nationally, prices are tipped to grow 2.1 per cent in the next 12 months.

Price rises of 3.3 per cent are expected in Queensland, as well as NSW.

But Mr Oster said:”the outlook for Victoria (1.3%) and SA/NT (-0.4%) was scaled back… while prices were expected to remain flat in WA.”

Mr Stevens had told his New York audience:”credit conditions are only one of several factors at work here.

“But credit conditions are very easy.

“So while the conduct of monetary policy can’t allow these financial considerations to dominate the ‘real economy’ ones completely, nor can it simply ignore them.

” A balance has to be found,” Mr Stevens said.

“To this point, the balance that the Reserve Bank Board has struck has seen the policy rate held at what would once have been seen as extraordinarily low levels for quite a while now.

“The Board has, moreover, clearly signaled a willingness to lower it even further, should that be helpful in securing sustainable economic growth.

“The Board has been proceeding with a degree of caution that is appropriate in the circumstances.

“It also has, I would say, a realistic assessment of how much monetary policy can be expected to achieve in supporting the adjustment the economy needs to make.

Any help in boosting sustainable growth from other policies would, of course, be welcome.

“In particular, things that could credibly be seen as lifting prospects for future income, and increasing confidence in those prospects, would give easy monetary policy a good deal more traction,” Mr Stevens said.


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Alan Thornhill is a parliamentary press gallery journalist.
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