Shortage May Push Prices: RBA

SHORTAGE MAY PUSH PRICES: RBA

The Reserve Bank says risks to banks from the housing market have faded as big city prices recover, but says “rapid” price growth could re-emerge due to potential supply shortages.
In its six-monthly review of the financial system, the RBA has outlined the dilemma it faces in housing. While the market bounce has put banks and many households in a better position, the RBA also highlights the potential for challenges in the future if prices rebound sharply.
After four months of rising house prices in Sydney and Melbourne, the RBA says banks are less exposed to large numbers of customers falling into negative equity.
But following sharp falls in approvals for future building construction, the central bank has highlighted the longer-term risk of a future housing shortage, which may reignite rapid price growth down the track.
“With population growth projected to remain strong, ongoing weakness in building approvals would likely result in a shortage of new housing in several years’ time with a resulting risk of rapid growth in prices that would stimulate stronger debt growth,” it says.

SOURCE: TERRY RYDER 12/10/19