A senior official at the Reserve Bank of Australia (RBA) warned of the risks associated with skyrocketing Sydney apartments market supply for financial stability.
The Sydney apartment market is now relatively quiet after the city has added more than 80,000 apartments in recent years. This has resulted in an increase in the housing stock in the region, up about 5%, said RBA Deputy Governor Michele Bullock in a speech.
"Our main concern in this regard from the point of view of financial stability is the possibility that this large influx of supply will worsen housing price declines and thus have a negative impact on the financial situation of households and developers. . Currently, the risks here seem to be high but contained, "she said.
Slow response to demand pressures in the East Coast housing market resulted in an increase in property values ​​in Sydney, up 75% from here to five years up 39 in mid-2017. By the time the new apartments went online, demand had dropped and prices had dropped, according to RBA Governor Philip Lowe.
The real estate market was also affected by the credit crunch as banks controlled their loans to investors and imposed stricter rules on borrowers during the royal banking commission.
Bullock said the data shows a reduction in credit demand as a major factor in the housing crisis compared to tighter lending conditions.
"All we can do, and all that [RBA] can do, is to continue to encourage the banks. Think carefully about whether your lending standards are too stringent and whether you can relax a bit, "she said.
Sydney apartment prices have fallen since their peak, vacancies have risen and rents are down, according to a Bloomberg report.
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