Powered by MOMENTUM MEDIA
subscribe to our newsletter

Reserve Bank could pour fuel on fiery Sydney market

Sydney’s “exuberant” housing market might soon be further boosted after governor Glenn Stevens raised the possibility of another interest rate cut.

The governor of the Reserve Bank of Australia told the American Australian Association that Sydney prices have reached excessive levels, partly due to “very easy” credit conditions.

“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,” he said.

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

Nevertheless, Mr Stevens hinted that another rate cut might be coming, following the Reserve Bank’s decision in February to lower the official cash rate from 2.5 per cent to 2.25 per cent.

Advertisement
Advertisement

He said the Reserve Bank “has been offering support to demand” in the economy, given that unemployment is “elevated” and inflation is forecast to remain within the 2-3 per cent target.

“So interest rates should be quite accommodative and the question of whether they should be reduced further has to be on the table,” 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 signalled a willingness to lower it even further, should that be helpful in securing sustainable economic growth.”

Mr Stevens also used his New York speech to note that regulators have been closely monitoring risks in the housing market since December.

PROMOTED CONTENT


“APRA has announced benchmarks for a few aspects of banks' housing lending standards and both APRA and the Reserve Bank will be monitoring the effects of these measures carefully; at this stage, it is still too early to judge them,” he said.

“We can only say that, over the past few months, the rate of growth of credit for housing has not picked up further.”

Mr Stevens also said that the Australian financial system appears to be resilient to a range of potential shocks, whether from home or abroad.

“Banks' capital positions are sound and are being strengthened over time,” he said.

“They have little exposure to those economies that are under acute stress at present. Measures of asset quality – admittedly backward-looking ones – have been improving.”

Reserve Bank could pour fuel on fiery Sydney market
mortgagebusiness

Latest News

The percentage of young adults looking to pay down their home loans has risen over the past five months, according to new data. ...

Despite the Reserve Bank digging its heels in on the timing of its cash rate climb, Westpac economists have predicted the right conditions w...

Customer-owned banks operate around four branches per $1 billion in assets, while the big four collectively run less than one shopfront per ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

When do you expect the cash rate to start increasing?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.