RBA Governor Stevens speech in Tasmania this morning was wide ranging and one topic he touched on was the state of housing in Australia.
Stevens was fairly sanguine on the outlook for housing at the moment but did give a warning on Sydney property price which reminded me of 2003 all over again.
On the positive side Stevens said that “with dwelling prices having fallen between 2010 and 2012, some recovery was not in itself particularly cause for concern, certainly not initially.”
So it was no problem unless prices just keep rising and expectations lead to “overconfident expectations of continuing gains.” However he noted this is not a problem saying “to date the amount of new borrowing does not appear, overall, to be imprudent.”
But notwithstanding all of the above he gave a very strong warning to Sydney property owners and buyers:
investors should take care in the Sydney market, which is the main area where a large increase in borrowing has been occurring. The total value of credit approvals for investor loans in New South Wales as a whole is about 130 per cent higher than in 2008, and it is in the investor segment where there has been evidence of some increase in lending with loan-to-value ratios above 80 per cent in the past couple of quarters.
To reinforce the message – just in case anyone missed it – he added.
in forming expectations about future price gains and deciding their financing structure, people should not assume that prices always rise. They don’t; sometimes they fall.
Property investors, you have been warned.