Watchdogs OK with housing market right now

·2-min read

Josh Frydenberg has held discussions with the Reserve Bank of Australia and the prudential regulator over what is becoming a hot property market but believes they are comfortable with the present situation.

The treasurer warns that the RBA and the Australian Prudential Authority both have the tools to put speed limits on banks to ensure lending standards are upheld.

"Right now, when I spoke to the head of APRA and the Reserve Bank governor, they have monitored the housing market closely and they are comfortable where it is at," he told ABC radio on Wednesday.

RBA governor Philip Lowe says housing markets have strengthened further, with prices rising in most jurisdictions, while housing credit growth to owner-occupiers has picked up, with strong demand from first home buyers.

"Given the environment of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully and it is important lending standards are maintained," Dr Lowe said.

Recent figures show house prices have grown at their fastest in 32 years, while home lending and building approvals are at, or close to, record highs.

In particular, demand for mortgages from first home buyers is at a 12-year high.

"The fact interest rates are historically low is giving an opportunity to first homebuyers to come into the market.," Mr Frydenberg said.

He also believes if the value of their home is going up, people have more confidence to spend.

However such enthusiasm failed to spill over into confidence in the past week, which dropped by its biggest margin since late March last year, when the economy was first hit by the COVID-19 pandemic.

The weekly ANZ-Roy Morgan consumer confidence index tumbled 4.6 per cent.

ANZ senior economist Catherine Birch blamed the snap Greater Brisbane three-day lockdown in the run-up to Easter and the end of the JobKeeper wage subsidy.

"History shows confidence tends to bounce back quickly once lockdowns lift so we should see confidence improve over coming weeks," she said.

"It's possible, however, the end of JobKeeper on March 28 will have a more prolonged effect on confidence."

Still, a strengthening housing market is giving a boost to the construction industry, with new orders, employment and supplier delivers all hitting record highs.

The Australian Industry Group/Housing Industry Association performance of construction index climbed by 4.4 points to 61.8 in March, the strongest monthly result in the index's history.

"The already fast-paced improvement in the construction industry lifted another gear," Ai Group head of policy Peter Burn said.

"Employment grew at the most rapid pace in the history of the series and wages rose faster than at any time since the global financial crisis."