"Disastrous" if RBA reacts to bubble claims: John Kolenda

Even though the federal election has passed, the country and our property market has a long way to go until favourable economic conditions and consumer confidence returns, accordng to 1300HomeLoan managing director, John Kolenda.

Pointing to the Australian Bureau of Statistics' rising housing finance figures for each consecutive month over the last seven, he said this was largely due to an increase in investment demand and refinancing activity for lower rates.

“From what we see, a recent surge in real estate activity in Sydney is mainly from higher end foreign investors and this sort of interest is not being repeated in most parts of Australia,” Kolenda said.

“Activity from first home buyers remains subdued despite interest rates being at record lows and it is widely acknowledged that we haven’t seen any kind of blow out in borrowing,” he said.

The Reserve Bank of Australia's reduction to an all-time low of 2.5% has helped to maintain activity in the property market, and current discussions of a property bubble similar to that in the US are off the mark, he said.

“It could be disastrous to see the RBA react in the near future to headline grabbing speculation about property bubbles by applying an interest rate handbrake."

In fact, he noted that Australians are paying down debt and increasing savings.

“In my view, APRA’s comments urging banks and non-bank lenders to continue to lend responsibly are fair, but they are hardly a warning of a coming financial meltdown and housing bubble," he said.

“It doesn’t help confidence when some commentators and sections of the media keep talking up property prices. Australia is expensive compared to most parts of the world but the reality is that prices have largely fallen in recent years.”