Melbourne housing prices still increasing faster than income growth: RBA

The cooling in the Sydney property market reflected a combination of factors, including increased supply of new dwellings, some tightening of credit conditions, higher interest rates on loans to investors and some reduction in offshore demand.

That's the conclusion of the RBA governor Philip Lowe, speaking at the annual dinner of the Australian Business Economists in Sydney on Tuesday.

"The increasing unaffordability of prices for many people has also probably played a role," he added in a speech tonight to economists.

In Melbourne, where the population is growing very strongly, Lowe suggested housing prices are still increasing faster than incomes, although the rate of increase has slowed.

"Elsewhere, housing prices have been little changed over recent months.

"Conditions are subdued in Brisbane, where the supply of apartments has increased significantly, and remain weak in Perth, owing to slowing population growth following the unwinding of the mining investment boom."

After noting the state of price growth in the capitals Lowe advised it was "important to be clear that the RBA does not have a target for housing prices."

But he added that "a return to more sustainable growth in housing prices does reduce the medium-term risks.

"These risks have not gone away, but the fact that they are not building at the rate they have been is a positive development."

While suggesting the central bank's next move in official interest rates is more likely up than down, Dr Lowe said there were still too many people out of work and inflation was set to remain below the 2-3 per cent target through to 2019.

"There is not a case for a near-term adjustment in monetary policy," he said.