RBA?s Glenn Stevens urges action to avoid property ?bust?

[redwing]

The baby boomer generation?s love of investment property could end in *tears, according to the *governor of the Reserve Bank of *Australia, Glenn Stevens.

Mr Stevens, speaking after a speech that raised the prospect of a housing bubble, suggested property wasn?t the fail-safe investment many Australians believe it to be.

?We perhaps have been a little bit over keen on investment property as our retirement plan,? he said. ?We may at some point be a little disappointed.?

The comments appear to be part of a carefully calibrated strategy by the central bank to dampen expectations about surging property prices, which by some measures have risen the most in the English-speaking world.

The comments were backed up by Aussie Home Loans founder John Symond, who said prices in Melbourne and Sydney have been ?on fire? and could be unsustainable.

?I?ve been involved in housing and finance now since 1970, over 40 years, and I?ve never ever seen the market where interest rates are so low and the belief of consumers is that these rates are going to stay low for quite a while,? he said in an interview.

?So that gives them confidence to go and borrow.? Experts are split over whether property prices have risen too high. But a sharp fall could hurt the banking industry, which finances most mortgages, and hit the broader sharemarket. Mr Stevens said there was a need to avoid building up too much risk in the banking sector by individuals taking on too much debt, a reference to investors who borrow to buy property.

?That could leave the economy exposed to nasty shocks in the future. The more prudent approach is to try to avoid, so far as we can, that particular boom-bust cycle,? he said.

Cont...

 

[redwing]

Also to add to bearish thread

House price boom must end, says David Gonski

ANZ chairman David Gonski has warned Australia's booming housing prices cannot go on forever and the market will eventually experience a correction.

The former Future Fund chairman said ANZ and all the big banks were "very aware of history" when it came to financial lending in the residential mortgage market.

"There will come a time when there will be a correction," he told the Australian British Chamber of Commerce.

"The fact is, anyone who believes prices always go up is, I think, a fool."

Cont...

 

[MarkB]

Tbh, I'm not hearing anything that either

(a) isn't common sense that people didn't really know already

or

(b) will actually take the foot off the accelerator (in the foreseeable future).

I guess Part B is to follow. But this isn't even Jawboning at this point (a reference to possible future big-stick wielding by the RBA).

As recently as 2 days ago, the RBA said this -

Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2-3 per cent target over the next two years.

In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

 

[Redom]

MarkB do you know much about how the RBA's rhetoric during previous upturns in the housing market (early 2000s)?

Agree that talk wont really slow much down.

 

[see_change]

My thoughts are here

http://somersoft.com/forums/showpost.php?p=1209385&postcount=59

Cliff

 

[redwing]

David Gonski from the ANZ must not have talked to the ANZ economist Warren Hogan?

No Housing Bubble

?Certainly no bubble,? said Warren Hogan. ?The perceived expensiveness of our property market is, as much as anything, a social issue ? affordability issues. We simply don?t have the speculative credit element there to describe it as a bubble. Low-income earners getting heavily *leveraged was the problem in the United States we don?t have that issue here,? Hogan added.

 

[redwing]

Tbh, I'm not hearing anything that either

(a) isn't common sense that people didn't really know already

or

(b) will actually take the foot off the accelerator (in the foreseeable future).

I guess Part B is to follow. But this isn't even Jawboning at this point (a reference to possible future big-stick wielding by the RBA).

As recently as 2 days ago, the RBA said this -

Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2-3 per cent target over the next two years.

In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

Jawboning mentioned here

The rampant winter Sydney and Melbourne residential auction markets will trigger the RBA Governor to return to jawboning.

The bubble popper-in-chief Glenn Stevens will wisely be taking whatever opportunity to douse these red hot property markets with a strengthening of the language around the market's intensity.

Especially surrounding the Sydney growth, which while much of it catch-up, is looking overly exuberant in today's RBA chart pack.

 

[redwing]

It's official: Australia's property prices are out of whack

Struggling to buy a house? It could be because our property prices are among the highest in the world when compared to incomes, and we're relying on luck for the situation to change, writes Michael Janda.

A new IMF report confirms that Australia belongs to an elite economic club - one where house prices are way above historical norms.

The International Monetary Fund's data places Australia third among developed nations on the ratio of house prices to incomes, and fifth on the measure of house prices to rents, when both figures are compared to historical averages.

Indeed, Australia is specifically mentioned by the IMF's deputy managing director Min Zhu - along with Belgium, Canada, Norway and Sweden - as one of the countries where house prices are out of whack with where history suggests they should be.

We might be among the worst, but we're not alone: out of 27 OECD countries examined, 19 currently have above-average house price to rent ratios; and 14 out of 24 developed economies still have above-average house price to income ratios, even after the dent in home values in many countries caused by the global financial crisis.

Cont...

No New Zealand?

 

[Ausprop]

what's that squeaking noise, can anybody hear it? oh Glenn Stevens again

 

[Richard Feynman]

I'll just leave this here.

 

[see_change]

Redwing

Given the difference between experts , one wonders how anyone is anyone can come to a sensible conclusion ...



Cliff

 

[Blair007]

Looking at this graph it shows me that desirable countries have higher house prices vs income compared to less desirable countries. It comes down to demand - people are prepared to pay a premium to live in countries that offer a better living conditions.
So to me this graph doesn't alarm me at all..

 

[Deltaberry]

That's a pretty big call. Countries like Japan and Germany have very superior standards of living, higher in many parts if not on par with Australia.

 

[joeExpat]

Looking at this graph it shows me that desirable countries have higher house prices vs income compared to less desirable countries. It comes down to demand - people are prepared to pay a premium to live in countries that offer a better living conditions.

I don't see this at all it seems very random. Some of the best countries to live in are around the middle. And Belgium?

 

[Blair007]

Yeh im probably wrong with the other countries, i just had a look in the top half and in my eyes the countries where much more desirable to live in than the bottom half.

But my point is more towards Australia and New Zealand. We are both Young countries, clean and healthy, fresh and sort of an escape from some of the big over populated cities in the world. Lots of people want to live in Australia and NZ, and too me that is why the house price vs income is high. I think people will continue to choose Australia and NZ over other countries and therefore the house price vs income will be sustainable, no?

 

[Deltaberry]

When you say many people, you actually mean many Chinese.

The only reason because Japan isn't booming is because the Chinese are not going.

 

[Blair007]

Yes many Chinese but also other countries. And I think the trend of people wanting to live in Aussie/NZ will continue, because of this trend I think it justifies the prices we pay for housing

 

[Shadow]

Japan isn't booming because the population is in decline. Every year there are fewer people competing for the same pool of homes. Supply will always exceed demand.

 

[red liverbird]

Does anyone know what the story with Belgium is?

 

[Intrinsic_Value]

Does anyone know what the story with Belgium is?

yes, its EU beurocratic territory.