Lowe calls for more action to increase housing supply
Cooling demand won’t be enough to help housing affordability, the RBA governor has said.
Cooling 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.
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