RBA concerned about real estate risks

RBA concerned about real estate risks

Minutes of the Reserve Bank of Australia October board meeting suggest the RBA is in no hurry to cut interest rates because it still concerned about an over-heated property market.

“Members noted that domestic sources of risk to financial stability in Australia continued to revolve mainly around developments in local property markets,’’ the RBA minutes said.

The minutes alluded to the enhanced scrutiny of housing lending practices undertaken by APRA and the Australian Securities and Investments Commission since the end of 2014, noting that “investor activity was considerably higher – and lending standards in some parts of the market weaker – than had originally been thought.”

“Members further observed that the risks in commercial property and the property development sector were rising. Building approvals for new apartments remained very strong over 2015, even though rental markets appeared soft in some areas.”

That said, the RBA seems to be noting the concerns while observing they seem to be under control with “signs that the response of the banks to supervisory measures implemented by APRA were helping to manage risks in the housing market.”

The ANZ economics team maintains that it still expects to wait until next year to cut rates again.

However, it says if other banks follow Westpac and raise rates in the coming weeks “a late 2016 rate cut cannot be ruled out.”

An award winning author and journalist, commentator, lecturer, and speaker, Leon is a freelance business journalist who covers a range of areas including politics, strategy, globalization, leadership and all the big trends ahead. His main skill is summing up all the news that’s around. For the last 30 years, his main focus has been on management issues. He also produces two podcasts for RMIT University, Talking Business and Talking Technology. Leon has worked for Fairfax, News Limited, AAP and the Herald and Weekly Times.

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