JAWBONING

You can’t talk a good thing down

Lets not beat about the bush – the Reserve Bank of Australia is uncomfortable with the strength in the housing market and it wants to slow down further price rises.

To make this happen it has been tossing out suggestions all over the place, to try and dent people’s enthusiasm for real estate. Suggestions such as it’s cheaper to rent then buy or that, perhaps, lenders should have new mortgage restrictions (ala NZ where banks are restricted to lending 80 per cent of the value), or by raising speculation that we need to restrict foreign buyers.

These ideas have been planted (known as ‘jawboning’ in economics) in the hope they make buyers and lenders pause and ultimately slow down their activity.

Well, they haven’t worked. And, they’re not likely to.

Sure we will always have ups and downs. But underlying this we have a well documented national housing shortage based on our existing population –  never mind our growing population.

Until the number of homes outpaces population growth (and we’re talking decades, if ever) there will continue to be strong underlying demand from both buyers and renters.

International buyers (and tenants) have played a significant role in our housing markets, especially in cities such as Sydney and Melbourne. However, so have the border crossings from the southern states in to Queensland, for example, or from Victoria to NSW or Tasmania to Western Australia. Foreign buyers, either international or interstate, are just part of a dynamic and growing population. And one thing we do know, it’s population growth that sustains long term property prices, rental incomes and future demand — not jawboning.

 

JOCK BING