The deepening risks in the housing market

Posted by Simon Dehne on September 27, 2015 in Latest News with No Comments


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House prices surged further in the June quarter, though growth was concentrated almost entirely in Sydney and Melbourne — which highlights the growing risks in Australia’s biggest asset class. Nationally, the house price-to-income ratio reached a new high, reflecting lower interest rates and elevated investor activity.

The current scenario appears unsustainable unless income growth picks up, which remains unlikely as our terms of trade continues to fall, or the Reserve Bank cuts rates further. The latter remains quite likely, despite recent optimism by the RBA, but in practice would be offset by APRA’s recent dalliance with macroprudential policy.

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