The head of the banking regulator doesn’t know if the housing market is in a bubble, but says it certainly looks risky.
With house prices rising much more quickly than incomes, and household debt still high, the property market could pose a risk to the economy, Australian Prudential Regulatory Authority chairman Wayne Byres said.
“If you look at the conditions we are in at present, where we have very low interest rates, very high household debt, subdued income growth, rising unemployment, very high house prices, a very competitive financial market in terms of house lending … there’s a lot of potential for risk,” he told a federal parliament economics committee.
“Risk is probably higher than it might otherwise be and that is why all of the agencies are paying particular attention to it at the moment.”
But Mr Byres stopped short of saying Australia was in a housing bubble.
“I don’t know what a bubble is and I don’t quite know how you spot it … If these things were easy to spot and define, almost by definition regulators could deal with them,” he said.
APRA is responsible for ensuring the stability of the financial system, which includes ensuring lenders are able to weather downturns.
Sydney’s housing market is soaring and showing no signs of slowing, with its median house price expected to climb well above $1 million within two years.
Prices in Sydney have risen almost 14 per cent in the past 12 months, according to the Australian Bureau of Statistics.
Brisbane’s property market is also expected to continue to grow, while prices are set to rise at a slower rate in Melbourne and Adelaide, and possibly fall in Perth as the mining boom winds down.