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RBA Concerned About Housing Bubble

Australia’s central bank warned of speculative demand in the country’s real estate sector, triggered by record low interest rates, signaling that further monetary policy easing is unlikely in the near term.  The Reserve Bank of Australia (RBA) issued the statement Tuesday in the minutes from its latest policy meeting on September 2, when it kept interest rates at 2.5 percent for a 13th straight month.

“For investors in housing, the pick-up in housing credit growth had been more pronounced than for owner-occupiers, with investor demand particularly strong in Sydney and to a less extent in Melbourne,” RBA said.  “Members further observed that additional speculative demand could amplify the property price cycle and increase the potential for property prices to fall later,” it added.

Australia’s home prices have risen more than 10 percent so far this year, driven especially by demand for investment properties.  On the Australia dollar, the RBA maintained that the currency remains “above its fundamental value,” despite the Aussie’s recent dramatic fall against the U.S. dollar, dipping below the 90-cent handle this week for the first time since March.

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