The International Monetary Fund has warned the Australian property market is at risk of “price overshooting”.
In a recent report on the Australian economy the IMF pointed to dangers to recent surges in property prices and rising investor expectations.
"Attention should be paid to the risk - as in any situation where asset price inflation accelerates - that a prolonged period of rapid price growth could give rise to expectations-driven, self-reinforcing demand dynamics and price overshooting," said the report.
If house prices were to drop suddenly it would have a serious impact on the overall economy, warned the IMF. A shock to household incomes or borrowing costs were suggested as possible triggers for a decline.
“The authorities would need to be prepared to take preventative actions if household credit growth, transactions volume, and prices accelerate. They have both the tools and experience to respond should these risks begin to emerge — following the large run up in house prices in the early 2000s, action by the RBA, Treasury, and APRA, through a combination of public communication, intensive supervision, and other actions led banks to take a more conservative approach to mortgage lending and helped cool the housing market without a sharp decline in prices.”
High levels of regulation in the banking sector would also help to limit the impact of a drop in prices, said the report.
"Households have built up large mortgage buffers over the last several years, the full recourse nature of lending provides an incentive for continued repayment, banks’ capital positions are strong, and lending standards are tightly enforced with a strong regulatory focus on the borrowers’ ability to service their loans. These features have contributed to the low level of non-performing mortgage loans sustained over the past decade."
After a prolonged period of sluggish growth, the IMF welcomed the recent revival of the property market as “encouraging” but added that “a broader pickup in activity in the non- mining services and tradable sectors is needed to underpin and sustain growth going forward”.
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now
Top Suburbs :
Get help with your investment property
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus an appointment is free.
We value your privacy and treat all your information seriously - you can check out