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Low rates have been fuelling investments in Australian Housing sector for some time now.
- In Australia, Housing prices are up more than 20% since 2012.
- In Sydney alone Prices are up more than 50% in three years.
Prices in important cities like Perth, Melbourne, and Brisbane are going up faster than the regional cities like Canberra, Adelaide.
Today, Reserve Bank of Australia (RBA) in its policy statement has expressed worries over the sector. RBA also noted that growth in loan to this segment is much steeper when compared to credit growth in business segment.
- Moreover loans are being used as investments in the housing sector in greater proportion than to occupy.
Analogy -
- Steep rise in housing prices might give further rise to speculative bets in housing sector.
- RBA, for first time in last many policy statements expressed clear worries over the price rise.
RBA so far expressed its desire to limit the risks using regulatory policies. However, the condition puts it in dilemma over further rate cut. The bank might move to wait and watch mode, before further policy actions.
For Aussie, bias still remains on the downside, however neutral stance by RBA might lead it to consolidation mode. Aussie is currently trading at 0.766 against dollar.
