Lowe calls for more action to increase housing supply

Adam Smith 5 April 2017

house price tag1Cooling demand won’t be enough to help housing affordability, the RBA governor has said.

Following the Reserve Bank’s monthly board meeting yesterday where it chose to leave the official cash rate on hold at 1.50%, RBA governor Philip Lowe has told a Sydney gathering that regulatory moves to ease housing demand may not be enough to stop surging house prices.

Lowe praised recent moves by APRA and ASIC to tighten criteria for interest-only lending, saying a decreased reliance on interest-only loans would be “a positive development”.

“With interest rates so low, now is a good time for us to move in this direction. Hopefully, the changes might encourage a few more people to think about the merit of taking out very large interest-only loans when interest rates are near historical lows,” Lowe said.

But Lowe warned of the need to be “realistic” about the effectiveness of the regulatory measures.

“As I said before, the underlying driver in our housing market is the balance between supply and demand. The availability of credit is undoubtedly a factor that can amplify demand, but it is not the root cause,” he said.

Instead, Lowe said more action was needed to increase housing supply.

“It's hard to escape the conclusion that we need to address the supply side if we are to avoid ever-rising housing costs relative to our incomes and the attendant incentive to borrow that is created by rising housing prices,” he said.

Image: Shutterstock

Get more from finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.
Ask a question