This is of concern to the Reserve Bank as it poses a threat to financial and economic stability. House prices as multiples of income and rents are already near record levels and further increases will accentuate the risk of a sharp price correction once demand and supply come in to closer balance.
Today I will discuss these housing market imbalances: their causes and the risks they present. I will also touch on policies that could assist in reducing the current imbalances. But first, let’s recap housing market developments over the past year. 2.