Property lobby slams the RBA for being 'unjust'

by Julia Corderoy23 Oct 2014
The Reserve Bank of Australia must not hold the Australian public to ransom by using interest rates to curb high property prices, according to the Real Estate Institute of New South Wales.

The property association’s president, Malcolm Gunning has said they are “disappointed” with the bank’s constant back-and-forth when it comes to the housing market.

“We are very disappointed that RBA Governor Glenn Stevens is trying to restrict investment in property by sending out warnings about buying property,” he said.

“Six months ago, Mr Stevens was encouraging investment in real estate. Now that the public is buying properties with confidence the RBA has changed its mind and is being critical, giving warnings about investing in an over inflated market.”

Gunning says it is not the role of the Reserve Bank to give investment advice, especially not to single out property, which is a safe investment option for Australians.

“The fact is that investors are more confident about putting their money in Australian property compared to the uncertainty of the share market and the underlying mistrust of this sector following on from the GFC,” he said.

“While we admit that low loan-to-value ratios (LVR) of 5% are dangerous, and that this practice should be curbed by the banks being asked to be more responsible with their lending, it is not the RBA’s place to use interest rates to restrict the property market.”

Using interest rates to manipulate one sector of the market is unjust, says Gunning, and it is in the best interests of the economy for the Reserve Bank to leave interest rates on hold.

“For too long, interest rates have been used as a quick fix. The RBA moves interest rates for employment, terms of trade and currency. They use a broadsword approach, but must be more targeted by providing guidance for lending institutions rather than making the whole economy suffer.

“The RBA must continue to keep interest rates on hold for the foreseeable future to help continue to boost the flagging economy,” he said.

 

COMMENTS

  • by Grahame Hale 23/10/2014 9:16:07 AM

    The Reserve Bank is acting like a school teacher threatening to cane all the property investors. What they should be tackling are the promoters who want investors to take interest only loans and in property they are promoting so they can get their 20% commission. Property is not going up for ever as supply and demand will cut in. Currently people can afford the loan but as prices go up they will drop out. Greed id taking over.
    How about getting a Reserve Bank Governor who know what he is doing. Look at the way they moved interest rates in the past. That control has gone now as banks move away from the reserve bank.

  • by Salvatore 23/10/2014 1:25:27 PM

    "Gunning says it is not the role of the Reserve Bank to give investment advice" I whole heartily agree! Its such a silly populist argument that its investors who are driving property prices and making it unaffordable for FHB! Construction is finally getting off the ground to increase supply and they want to shut it down before it has an an effect. Go figure?