After announcing no change to interest rates last week, the RBA has issued a timely warning to property buyers not to take on too much debt trying to secure a home in the low-interest environment.
RBA governor Glenn Stevens warned buyers that home prices aren’t guaranteed to always go up, and can actually fall in some instances.
“People need to keep in mind that prices don’t just rise, they can fall, they have fallen and we need to be careful that we don’t take on too much leverage,” he said.
“It’s (household debt) pretty high now and we’d, surely, be asking for trouble if we saw a big step up from where we are.”
Mr Stevens was speaking to federal politicians at the House Economics Committee in Sydney.
While housing affordability has improved thanks to low interest rates, actually buying a home had become less affordable thanks to escalating prices especially in Sydney.
Mr Stevens also said there’s strong demand for property in Australia from foreign investors but the impact of this on prices was minimal.
When it came to economic growth and unemployment, Mr Stevens said he expected unemployment to peak at some stage during this year at that economic growth will soon gather momentum and get above 3 per cent.
“Output leads employment. I’d say that would be true in the future and I’d say, probably, one to two quarters.”