Auctions disrupted
The Reserve Bank's Guy Debelle was grilled by the Senate Estimates on whether low interest rates and QE should be normalised to stop house prices from rising (that's the abridged version, anyway).
In short, no, for a number of reasons.
Firstly, Debelle noted that the quickest way to reduce income inequality is to bring the unemployment rate down, and to get wages growing again.
Unemployment has a first order effect on income inequality, and lifetime inequality, said Debelle.
And higher interest rates would mean higher unemployment, when the RBA is tasked with achieving full employment.
Secondly, the household debt to disposable income ratio has been declining to below 1.8x, while mortgage serviceability is at its easiest level in about 45 years.
Thirdly, as Debelle pointed out, although there is some very high capital growth being posted in regional Aussie housing markets, detached housing construction is also at the highest level on record.
Unlike apartment developments, houses tend to be built quickly, and the new supply is being delivered right across the entire country, points out Debelle.
At the current time, there is virtually no net immigration, so it's probably not a smart idea to tighten interest rates unnecessarily into such a dynamic, especially as the shift to the regions might well go into reverse next year as the capital cities and borders eventually reopen in full.
Fourthly, Debelle noted that rents have been falling in some markets, and very sharply in some cases, such as for units in inner-city Melbourne.
Even if it was the Reserve Bank's job to target housing prices - which it really isn't - outcomes have been greatly varied across sub-markets over recent years.
As Debelle pointed out, tax can make a difference to housing market outcomes, but that's the government's responsibility.
And fifthly, there is a high volume of listings coming online for this time of year, which will also naturally cool the market.
Melbourne was scheduled to have a huge 1,369 auctions this weekend, although 281 were withdrawn.
Just 502 had been reported sold by 6pm on Saturday.
Source: Domain
Sydney posted more solid results, and there is some evidence that unit prices are now following house prices higher.
