Fears of valuation troubles in the housing market continue to be fuelled by growing property investor activity, which hit record levels in August.
"The RBA is worried about housing prices and what that could do to household balance sheets."
The Reserve Bank of Australia’s statement following the its board meeting this week – which was little changed from the September – emphasised that the cash rate is firmly on hold.
The RBA is clearly watching housing investor activity very closely and has flagged measures from APRA, the prudential regulator, targeted at housing investor activity.
The RBA is worried about “the pro-cyclicality of housing prices and what that could do to household balance sheets”, particularly the distributional effects.
On Friday, we saw that investors’ share of new housing finance approvals (excluding refinancing) hit a record high of about 50 per cent in August.
Historically, slower house price growth has foreshadowed less activity housing investor activity, but only time will tell whether we will see a similar pattern going forward.