RBA: Sydney prices remain concerning

Sydney-house-prices-are-rising-but-APRA-is-managing-the-risks-_157_6004099_0_14100822_300In an address to the House of Representative Standing Committee on Economics, Reserve Bank of Australia Governor Glenn Stevens said that while burgeoning prices in the Sydney property market are a concern, its regulation body is taking all measures necessary to ensure the market does not overheat.

Value growth in Sydney might not have reached the peaks of previous years, but the Australian Bureau of Statistics House Price Index shows that it is far and away the fastest growing market, with home values expanding 12.2 per cent over the 12 months to the December 2014 quarter. Brisbane and Melbourne – the only two cities within reach – saw significantly lower growth, with prices rising 5.3 per cent and 4.5 per cent respectively over the year.

First home buyers have been hampered by this growth but Mr Stevens noted that outside the Sydney market, house prices have risen at a more moderate 5 per cent over the year. He characterised this as healthy growth and not extreme enough to cause concern, particularly as some cities – such as Darwin – have seen prices fall.

“Developments in the Sydney market remain concerning, but in the end we did not see these trends as overwhelming a case for a further easing in monetary policy that was made on more general grounds,” he said.

Mr Stevens also pointed out that the Australian Prudential Regulation Authority will also take on a more supervisory role to mitigate and minimise risk factors in the property market, particularly the investment housing sector.

“This involves more intense scrutiny of investor loan portfolios growing at over 10 per cent per year, with the possibility, ultimately, of additional capital being required if APRA deems it necessary,” he said

While low rates create ideal conditions for investing in the Sydney property market, it’s important for investors to stay up to date with regulatory decisions, particularly if APRA pursues lending restrictions in the near future. Consult with your real estate agent if you have any questions about the recent rate cuts or your property portfolio.

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