Posted by Houses & Holes:
Bloomberg has a penetrating piece today hammering RBA/APRA complacency on house prices, which will be read far and wide in global markets (as well as MB is!):
Central banks from Scandinavia to the U.K. to New Zealand are sounding the alarm about soaring mortgage debt and trying to curb risky lending. In Australia, where borrowing is surging, regulators are just watching.
Australia has the third-most overvalued housing market on a price-to-income basis, after Belgium and Canada, according to the International Monetary Fund. The average home price in the nation’s eight major cities rose 16 percent as of June 30 from a May 2012 trough, the RP Data-Rismark Home Value Index showed.
“There’s definitely room for caps on lending,” said Martin North, Sydney-based principal at researcherDigital Finance Analytics. “Global house price indices are all showing Australia is close to the top, and the RBA has been too myopic in adjusting to what’s been going on in the housing market.”
Australian regulators are hesitant to impose nation-wide rules as only some markets have seen strong price growth, said Kieran Davies, chief economist at Barclays Plc in Sydney.
…“The RBA’s probably got at the back of its mind that we’re only in the early stages of the adjustment in the mining sector,” Davies said. “Mining investment still has a long way to fall, and also the job losses to flow from that. So to some extent, the house price growth is a necessary evil.”
…The RBA, in response to an e-mailed request for comment, referred to speeches and papers by Head of Financial Stability Luci Ellis.
…The RBA and APRA have acknowledged potential benefits of loan limits “but at this stage they don’t believe that this type of policy action is necessary,” said David Ellis, a Sydney-based analyst at Morningstar Inc. “If the housing market was out of control and if loan growth, particularly investor credit, grew exponentially then it’d be introduced.”
What do you call this, David:
Reproduced with kind permission from Macrobusiness