Governor Glenn Stevens says it's too early to signal great concern on property dynamics

Some property commentators have taken the view that property market dynamics are worrying, but Governor Glenn Stevens says it’s a little too early to signal great concern.

At Citi’s fifth annual Australian and New Zealand Investment Conference, Stevens says some rise in housing prices is part of the normal cyclical dynamic and improves the incentive to build and a price rise reversing an earlier decline isn’t something to complain about too quickly.

“Credit growth, at between 4% and 5% per annum to households, and less than that for business, does not suggest that rising leverage is so far feeding the price rise,” says Stevens.

Stevens says to pay close attention to credit growth, which may pick up somewhat over the period ahead and borrowing is increasing quickly in some pockets - a 40% increase over the past year in finance approvals for investment participation.

“We have certainly experienced higher rates of growth of finance than that in the past, and it may be that we are seeing some catch-up from a delayed initial response to fundamentals favouring more investment in housing

“Nonetheless, as this activity continues, lenders and borrowers alike would be well advised to take due care.

“It is very important that strong lending standards remain in place, and that decisions be based on sensible assumptions about future returns.

“That's what we need if we are to experience a long and sustainable expansion in housing investment that houses our growing population at acceptable cost, and pays reasonable returns on the capital deployed.

“That's the sort of outcome we want, as part of the more balanced growth path for the economy we are seeking over the years ahead,” says Stevens.

jc-insights-breakoutPROPERTY INSIGHTS

RBA watching Sydney property investment and urges due care

"And a recent RP Data chart indicates just why we are not near any level of unease. Sure there is a clear price momentum, but you never know what will emerge from left field to slow it, halt it, or send prices backwards as the rollercoast chart since 1997 shows."

Nicola Trotman

Nicola Trotman

With a penchant for the written word, Nicola has built a career doing just this – now Creative Director at thriving Melbourne-based PR agency, Greenpoint Media.

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