Great speech IMO: http://www.rba.gov.au/speeches/2012/sp-gov-080612.htmlOne thing we should not do, in my judgement, is to try to engineer a return to the boom. Many people say that we need more ‘confidence’ in the economy among both households and businesses. We do, but it has to be the right sort of confidence. The kind of confidence based on nothing more than expectations of ever-increasing housing prices, with the associated willingness to continue increasing leverage, on the assumption that this is a sure way to wealth, would not be the right kind. Unfortunately, we have been rather too prone to that misplaced optimism on occasion. You don’t have to be a believer in bubbles to think that a return to sizeable price increases and higher household gearing from still reasonably high current levels would be a risky approach. It would surely be a false basis for confidence. The intended effect of recent policy actions is certainly not to pump up speculative demand for assets. As it happens, our judgement is that the risk of re-igniting a boom in borrowing and prices is not very high, and this was a key consideration in decisions to lower interest rates over the past eight months.
Stevens has been warning about leverage in the property market for some years now. Even encouraging people to pay down their home loans more quickly.
I think we can safely say that the old "B&H, prices double in 7-10 years" method of property investing is dead in the water for a long time to come. Time to look back to yields and prices have a fair way to melt down (and rents to slowly rise) before it's a worthwhile prospect in many capital city areas.