The Reserve Bank of Australia (RBA
) is at risk of “being behind the curve” on both present and future issues in the nation’s housing market if they don’t act soon, says one leading property analyst.
In the newly released paper, Christopher’s Housing Boom and Bust Report 2017
, Louis Christopher, managing director of SQM Research, says the RBA
will need to either lift interest rates or encourage the Australian Prudential Regulation Authority (APRA
) to reign in credit lending.
“Failure to do so will result in double digit national housing price growth in 2017 driven by an out of control Sydney and Melbourne housing market,” he warns.
While he admits that RBA
analysts were correct in calling the market slowdown this year, Christopher says that the Bank may move too slowly to protect the housing market from a range of risks.
needs to sow a stitch in time and move quickly,” he says. “But somehow we don’t think they will…”
Early indicators of an increase in owner-occupier demand within Sydney – combined with an abnormally low number of new listings for the spring selling season – is creating its own pressure points.
“The lack of listings has been creating angst among home buyers, particularly the ones who sold during August and need to rebuy back into the market before their settlement. This angst is starting to create a ripple effect,” Christopher says.
These effects have been compounded by elevated auction clearance rates and asking prices in both Sydney and Melbourne.
“What the RBA
is dealing with here is a resurgence in owner occupied demand that was sparked in the inner affluent areas that are less influenced by investor credit relations.”
This means demand has still increased despite APRA
’s successful efforts to slow down housing investment credit growth over the past year.
“So tapping on APRA
’s shoulders once again could be a little more complicated this time around as it will need to involve restricting owner occupied credit growth – something which the banks will be more reluctant to mess with.”
For this reason, the RBA
needs to act quickly, Christopher says. However, he predicts the RBA
will instead wait until there is more clarity in the data before deciding on a course of action. This may be until mid-2017 when credit growth rises to 10% or more, while a final decision will only come three months later due to the “wheels of bureaucracy”.
“It could be as late as third quarter 2017 before the brakes are applied,” he said. “Now the RBA
may try to pre-empt the numbers; however they don’t have a track record in doing this. They prefer to see hard evidence before taking action…”
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