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SYDNEY–The Reserve Bank of Australia said Friday that it was alert to a sharp surge in house-price growth in recent months, adding that regulators are watching the situation closely.
The central bank’s latest report card on financial stability said that with interest rates low around the world, “risks associated with asset prices and debt could build.”
“In a number of economies, including Australia, housing-price growth has picked up notably in recent months and is being watched closely by regulatory authorities,” the RBA said.
The RBA’s sharpened focus on house prices comes after the country recorded its fastest monthly pace of increase since 1988 in March, fueling fears that the market could be on track to badly overheat.
Major banks have moved to radically raise their forecasts for house-price growth, with some now expecting gains in the vicinity of 15% in 2021.
The jump in house prices is fanning speculation that the banking regulator will soon be forced to introduce clamps on mortgage lending to cool the market.
Both the RBA and the Australian Prudential Regulation Authority have said recently that mortgage lending standards are under closer scrutiny.
Australia’s house-price surge is being fueled by a much faster-than expected economic recovery, and the RBA’s policy guidance that official interest rates won’t be raised for another three year “at the earliest.”
Australia has also had success in containing the Covid-19 pandemic, allowing business to return to normal for many companies, who are rehiring workers.
CoreLogic data shows national house prices were up 2.8% in March from February. The gains were broad-based, with values rising by at least 1.4% across each of the country’s capital cities.
Sydney, Australia’s biggest capital, is leading the pack, with values surging 3.7% in March alone, and 6.7% in the first three months of the year.
The last time Sydney house values recorded a quarterly rise that strong was in mid-2015, just prior to moves by the APRA to slow mortgage lending. Those moves, which mostly targeted property investors, triggered steep house-price falls.
APRA Chair Wayne Byres said recently that surveillance on mortgage lending had been ramped up.
“On the radar are signs that housing-credit growth is picking up, and likely to outpace income growth for the foreseeable future,” Mr. Byres said.
“Should risks materialize we have a range of tools we could employ, ranging from interventions similar to that in 2015 and 2017,” he added.
APRA is looking nervously toward New Zealand, which recently took drastic steps to slow runaway house-price gains that threatened to increase debt massively and freeze many out of home ownership. House prices in New Zealand are up 40% since 2017, with much of the rise happening over the past year.

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