Is APRA ready for another house price boom?

Via Patrick Commins at the AFR:

…there are plenty of reasons to fear another leg higher in the property market.

For one, many younger Australians already despair at the thought of ever owning a home, just as many if not most parents are worried their children won’t ever enjoy the stability of home ownership.

Social discontent from growing inequality has destabilised politics overseas and led to unrest and populist leaders: from Donald Trump and Boris Johnson, to the yellow vests in France and the Northern League in Italy.

…Reserve Bank officials remain confident that Australians are too heavily leveraged to take on much more debt, and this reduces the potential financial stability risks associated with a new housing boom into 2020. Banks, too, are more cautious with their lending practices, the RBA notes.

…Instead of fending off what they believed would be a worsening in the housing market, they provided the perfect platform for where we are now: perched at the cusp of another housing market boom.

The jury is still out. I still see global volatility hammering local conditions over the next year so that should land on house prices.

That said, it is the clear objective of the ScoMo Government to generate another house price boom and damn the lifeboats.

The RBA is going to cut regardless. It’s mandate is employment and inflation, which is going to get worse on both counts. Where the house price rubber hits the road is at APRA, which is tasked with financial stability. It will need to tighten macroprudential again.

In other words reverse the very loosening of lending standards that Patrick Commins campaigned for a few short months ago.

Is it ready? With its walking dead chairman, recent dropping of the interest rate buffer, pre-occupation with holding back useless and hollow reforms? Hardly.

Patrick Commins should scold himself in the mirror. The APRA easing he campaigned for should never have happened.

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