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.