The RBA in its Financial Stability review really ramped up the rhetoric around the recent surge in property prices and investor demand. They said that “the composition of housing and mortgage markets is becoming unbalanced, with new lending to investors being out of proportion to rental housing’s share of the housing stock.”
They go on to say:
Strong investor demand can be a sign of speculative excess, with the risk that additional speculative demand can amplify the cycle in housing prices and increase the potential for prices to fall later. This is particularly the case if that demand is largely based on unrealistic expectations of future price growth, perhaps extrapolated from recent experience.
There is no missing this clear warning to buyers to be careful at current prices and nowhere is the evidence more stark on why the RBA is concerned than in New South Wales, where investment lending has literally gone parabolic.
The RBA told us they are they are actively discussing macro-prudential regulations to curb speculative excesses and restrict investment lending given they are clearly worried that as a result of this unbridled optimism toward housing investors risk a severe price correction in the future.