RBA watching house price boom like a hawk

10 March 2021

Reserve Bank governor Philip Lowe has his eye on the current property boom around the country and isn’t ruling out intervening to take the heat out.

Mr Lowe told the Australian Financial Review Business Summit that low population growth over the next couple of years could outweigh the other factors that are driving up house prices.

"There are many moving parts at present: record low interest rates; a shift in preferences towards houses and away from apartments; strong demand for housing outside our largest cities; large government incentives for first-home buyers and home builders; and the slowest population growth in a century," he said.

"Time will tell as to how these various factors ultimately balance out, but history suggests that shifts in population growth can have large effects on the housing market."

The RBA governor admitted low interest rates were forcing up prices, but said the central bank would not adjust its policy based on the housing market.

Rather, he said it was governments and financial regulators who should address the concerns around the hot property market.

"I recognise that low interest rates are one of the factors contributing to higher housing prices and that high and rising housing prices raise concerns for many people," he said.

"There are various tools, other than higher interest rates, to address these concerns, leaving monetary policy to maintain its strong focus on the recovery in the economy, jobs and wages."

The RBA is a member of the Council of Financial Regulators and warned the council could well intervene if they thought banks were dishing out risky loans.

"The Council of Financial Regulators has indicated that it would consider possible responses should lending standards deteriorate and financial risks increase," Mr Lowe said.

"We are not at this point, but we are watching carefully."


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