RBA issues warning over high house prices

Tuesday 29 September 2009

Article by Mozo

The Reserve Bank of Australia (RBA) has warned that the cost of houses is increasing, which could leave people requiring larger home loans.

Tony Richards, head of economic analysis department at RBA, claimed that the failure of supply to match prices could lead to worryingly high growth in prices.

He noted that the increasing cost of property could mean less low-income households could be less likely to look for new houses – something that could potentially impact on low-interest home loans.

The expert said this could mean that higher-income families will benefit at the expense of those with less available funds.

"We are not really any richer when the price of housing rises, but the more vulnerable tend to be hurt," he commented.

He said that while the undersupply of housing might not be as severe as some have estimated, this is not necessarily encouraging because the rising cost of homes could have "choked off some of the demand that might otherwise have existed".

Meanwhile, the RBA recently reported that the financial situation for many Australian households is better now than it has been in nearly two years.

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