RESERVE BANK PUTS LENDERS ON NOTICE

Asian BuyersChinese investors are aggressively lifting their Australian residential and commercial real estate investment at a time when the Reserve Bank is warning bubbly property markets could be hit with a price correction, writes Simon Johanson of the Melbourne Age. 10/10/14. 

Alarmed by the property frenzy in Sydney, Melbourne and parts of Brisbane, the Reserve hit the headlines two weeks ago, putting banks on notice they were being monitored and potentially facing tougher controls, so-called macro-prudential tools or constraints on lending.

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Moody Graph

It was reacting to momentum that has been building since this time last year, when it issued another warning about

the explosive growth of self-managed superannuation funds’ property debts and the risk they posed to the country’s financial system.

Spurred by a record 15-month run of historically low interest rates, Australian dwelling values rose9.3 per cent over the 12 months to September. Sydney’s homes rose 14.3 per cent and Melbourne’s 8.1 per cent over the same period, RP Data figures show.

Investors paused for breath in August, housing finance data shows, with loans falling slightly by 0.9 per cent. But debt for new dwellings continued its upward trajectory, rising a healthy 2.5 per cent.

Adding to the Reserve Bank’s headache will be the latest housing debt data. It shows the average Australian household’s ratio of debt to disposable income, or the proportion of wages spent servicing mortgages, has hit a record high.

Excerpts from Article by Simon Johanson

 

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