Australia’s prudential regulator, APRA, in concert with the RBA, worked hard across the course of 2015 to take the heat out of the Sydney and Melbourne property price boom.
But Australia is still building a large number of dwellings – mostly units – which, if they can find buyers, would put downward pressure on prices. That runs the risk of the house price boom turning into a house price bust as all the fresh supply hits the market.
Never fear, the Reserve bank said in its quarterly Statement on Monetary Policy (SoMP) for February released today.
While it acknowledged that the “impact of slowing housing price growth on future growth in dwelling investment is unclear,” the bank is firmly in the camp that believes Australia remains a desirable destination for offshore property investment.
“In the period ahead, dwelling investment seems likely to be supported by continued strong demand from foreign buyers,” the bank said.
But it went on to say that these buyers won’t be worried about prices potentially having topped out nor short term fluctuations.
“Information from the Bank’s liaison suggests that foreign buyers tend to have long-term motivations for investment and may be relatively unconcerned about temporary fluctuations in housing price growth,” the bank said.
That can be an important source of demand. Just look at the movement in house prices in Vancouver over recent years as foreign money pour into the local housing market.
Sydney and Melbourne property prices, and to a lesser extent the rest of Australia, have been primary beneficiaries of foreign buyers driving prices in recent years.
That said however the RBA said that the domestic price growth will still be driven by population growth, employment and expectations of house price growth itself.
It also sounded warned that “some geographic areas appear to be at risk of reaching a point of oversupply, particularly the inner-city areas of Melbourne and Brisbane.”
Most likely the RBA is hoping foreign buyers can at least mitigate the downside in these areas of the housing market.
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