As RBNZ tries to cool ultra-hot property market, Australian economist predicts RBA will follow
The RBNZ has just announced that it will tighten LVR requirements from March to try to cool the rapid home price appreciation across the ditch.
The proposals follow a nearly 20% house price rise over the last year and are to reinstate the LVR restrictions at the same level as prior to the onset of COVID-19, where a maximum of 20% of new lending would be allowed at LVRs above 80% for owner-occupiers, and 5% of new lending at LVRs above 70% for investors.
And that move is now raising speculation that the RBA may follow suit in 2021.
Speaking to the Australian Financial Review, independent economist Warren Hogan speculated that lending standards would be toughened by the Australian Prudential Regulation Authority. "The only policy option to cool a surging housing market is prudential," he said.
Even though economists like Hogan are concerned that APRA may be forced to act, others think that the authorities may be happy.
ANZ’s head of Australian economics, David Plank, told the AFR that the RBA wouldn’t be perturbed by a rise in house prices.
"If house prices are going up without a rapid increase in debt, then they won't bat an eyelid," he said. Most major banks expect house prices to rise next year by up to 9%.
