Sydney property boom won’t stop further rate cuts

In his opening statement to the House of Representatives Standing Committee on Economics on Friday, RBA governor Glenn Stevens noted that price rises in Sydney are “very strong, and they are pretty solid in Melbourne”.

“On the other hand they are much more mixed elsewhere,” Mr Stevens said.

“Excluding Sydney, the rise for Australia as a whole over the past year was about 5 per cent. That is a healthy pace but not alarming, and some cities have seen price falls,” he said.

“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.”

Mr Stevens noted that APRA has announced its supervisory approach to managing the potential risks posed by the rise in lending to investors in housing, which involves more intense scrutiny of investor loan portfolios growing at over 10 per cent per year, with the possibility of additional capital being required if APRA deems it necessary.

APRA has also reiterated its expectations for other elements of lending standards such as interest rate buffers and floors, he said.

“ASIC has begun a review of interest-only lending in the context of consumer protection legislation,” Mr Stevens added, noting that the central bank welcomed the steps and would keep working with other regulators in these areas.