18 Jun RBA notes housing supply shortage in Sydney
Article by Mark Muligan from SMH.com.au
House price inflation in Sydney and Melbourne remains a concern for the Reserve Bank of Australia, although its focus is shifting to the shortage of new stock rather than the impact of low interest rates on the market.
This is one of the observations in the minutes of the RBA’s last board meeting, on June 2, when the central bank opted to hold the cash rate at 2 per cent.
Analysts have said governor Glenn Stevens failed to give clear guidance on the bank’s next move in his comments around the decision. The minutes, too, refer only to ongoing “assessment of the outlook” based on data flow.
In a powerful speech in Brisbane last week, Mr Stevens stressed that any further cuts to the cash rate would have only limited impact on economic activity, and that it was up to governments and business to pick up the slack.
The RBA is known to be concerned about weak business investment, but also reluctant to further fuel double-digit price increases in Sydney property, the affordability of which has been the centre of fresh debate in political and economic circles.
While the RBA has repeatedly referred to its work with regulators in restricting riskier lending to buy-to-let and but-to-sell property investors, this is the first time in recent months in which it has pointed a finger at imbalances between supply and demand in the Sydney market.
“Although housing price inflation had remained high in Sydney and, to a lesser extent, in Melbourne over recent months, there had been some divergence in price developments for different segments of these markets; price inflation of detached houses had increased, whereas price inflation for units had eased in both cities,” the RBA minutes, published on Tuesday, say.
“Noting that housing price growth in other cities and regional areas had declined over recent months, members discussed the strength and composition of underlying supply and demand conditions in different parts of the housing market.
“They also observed that there was a relatively low stock of dwellings for sale in Sydney and Melbourne and that dwellings took only a short time to sell.”
The sentiment chimes with a series of speeches by RBA officials in recent weeks, not least that of Mr Stevens, who last week described pricing in some segments of the Sydney market as “crazy”.
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