Reserve Bank (RBA) governor Michele Bullock (pictured) has sounded the alarm on the nation’s housing shortage, saying supply remains the key issue driving both property prices and rents higher.
Appearing before a Senate hearing in Canberra last week, Bullock discussed housing supply, inflation, and interest rates while facing questions from the economics committee, Mortgage Choice reported.
“The issue with the housing market is supply and demand – we have demand for housing that outstrips the supply of housing and it's occurring both in housing prices and rents,” she said. “There’s more demand for rental properties than there are rentals available.”
Bullock said governments were working to address housing shortages but stressed that more needed to be done.
“We’ve got to get supply of housing moving,” she said. “My observations, certainly living in New South Wales, is the governments are trying very hard. But it involves planning, it involves construction and a whole series of other things governments are looking at, and I encourage them to keep looking at.”
Bullock has previously said new housing measures will take years to make a meaningful impact, warning that supply constraints are likely to persist through 2026.
The RBA governor also highlighted the market’s reliance on investors, warning they can amplify housing trends.
“Investors can exacerbate the cycle of the housing market,” she said. “It’s complex because on one hand, investors do buy houses, but then they rent them out to people.”
Bullock noted Australia’s rental market is unusually investor-heavy compared to other developed economies.
“In Australia, the rental stock is a bit unusual because it's effectively owned by investors,” she said. “The question is if there were less investors, would there be more houses to buy? You’d still have a need for renting so, who is going to provide the rental stock? It’s a complicated situation.”
Bullock said RBA is monitoring lending standards but sees no signs of rising risk.
“There had been concerns in the past that people were borrowing too much, causing loan-to-value ratios (LVR) to rise,” she said. “That introduces vulnerabilities into the system, which is a concern.”
“At the moment though, we don’t see it manifesting in a severe way. We aren’t seeing LVRs and debt-to-income ratios rising substantially. That’s a positive.”
Bullock added that investor activity remains typical of early housing cycle patterns.
“At the moment, what we observe with investors is typically what we observe in these cycles, which is that investors are the first ones to pick up,” she said.
Despite calls for further action, Bullock said RBA’s influence is limited to monetary policy.
“My policy that I have control over is the interest rate,” she said. “But supply is the big thing here. It’s been a structural issue for many years.”
She previously reiterated that RBA does not target housing prices directly.
“We have to focus on our mandate, which is inflation,” Bullock said. “The problem in the housing market is a structural deficit of supply… I’m not confident it’s going to make any impact in the next two years.”
RBA has previously cautioned that strong population growth, high construction costs, and limited new supply could continue to push affordability pressures higher even as inflation eases.
Read the Mortgage Choice report on realestate.com.au.
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