Why the RBA won't rescue the property market(funds-sg)
The RBA has resisted calls to rein in the housing boom, seeing interest rates as its main tool, but slowing the market now could hurt confidence and the recovery.
Why the RBA won’t rescue the property market
The Reserve Bank of Australia (RBA) has so far firmly refused to rein in the housing market’s exuberance. In March 2021, capital city house prices across Australia rose sharply. Both the head of the Australian Prudential Regulation Authority and RBA Governor Philip Lowe insisted they were watching lending standards closely and would act if the situation deteriorated.
The RBA’s view on tools
For years, the RBA dismissed other measures, considering interest rate changes as the only real weapon for managing the property market. In the past, interest-only loans—preferred by property investors—were not banned outright but were heavily restricted, forcing many investors out of the market and stabilising prices.
The risk of acting now
However, if the RBA were to stop the boom now, or even slow it, that could undermine confidence and damage the economic recovery. This is a key reason why the central bank has been reluctant to intervene.
The ongoing property boom
The national housing market has been booming. For the two-thirds of families who own property, this constitutes a significant source of wealth, while those struggling to get a foothold in the market find it agonising. According to CoreLogic, the number of homes listed for sale has fallen to a record low, 30% below the five-year average.