RBA likes high house prices

The Reserve Bank deputy governor, Ric Battellino, told a housing conference yesterday to expect higher house prices in the future as the economy improves and to recognise home buyers were getting value for their money.

House prices will be boosted by increased population growth and immigration, solid increases in household incomes and ”substantial competition” for construction industry workers from the mining sector said Battellino.

“Australian households as a whole appear to have the financial capacity to sustain a relatively high ratio of housing prices to income,“ said the deputy governor in his speech which has been interpreted by analysts as a defence of high Australian house prices.

”Lower interest rates have allowed households to take out bigger home loans without increasing housing loan repayments. In turn this has given households more buying capacity in the housing market, which has been reflected in house prices.”

Source: Sydney Morning Herald