Risks to financial stability from the housing market may be building, the RBA warns.
“If there were a need” for macroprudential tools to address rising risks from the housing market, they will focus on loan serviceability and the total borrowing capacity.
In a speech on The Housing Market and Financial Stability, RBA Assistant Governor Michelle Bullock said the unprecedented monetary and fiscal support to the Australian economy through the pandemic has helped “build a bridge” and the strong recovery in the housing market is part of that.
“But with the increase in housing prices and housing debt, risks to financial stability could be building,” she said.
“Even though the banks have strong balance sheets and lending standards are being maintained, there is a risk that in this environment, households will become increasingly indebted.”
“A high level of debt could pose risks to the economy in the event of a shock to household incomes or a sharp decline in housing prices. It is these macro-financial risks that warrant close watching.”
Whether or not there is need to consider macro-prudential tools to address these risks is something the reserve bank is “continually assessing.”