Australia's falling home prices not yet a threat to banks-RBA
By Wayne Cole
SYDNEY, March 20 (Reuters) - Australia's falling home prices
and high levels of household debt are not yet a threat to
financial stability, a top central banker said on Wednesday,
though there were risks to developers from a glut of new
In a speech in Perth, Reserve Bank of Australia (RBA)
Assistant Governor Michele Bullock also cautioned banks not to
go too far in curbing the supply of credit to the economy.
"From a financial stability perspective, prudent lending
standards are a good thing," Bullock told a conference on urban
planning. "But there needs to be a balance."
"The regulators are not proposing any further tightening in
lending standards," she added. "And the appropriate amount of
credit risk is not zero – banks need to continue to lend and
that will inevitably involve some credit losses."
The banks use of stricter standards on mortgages has been
blamed for exacerbating a downturn in home prices, in large part
by curbing investment loans.
However, Bullock said evidence suggested it was not so much
tighter credit that was driving down prices as a weakening in
demand for loans.
Since peaking in mid-2017, house prices across Australia
have dropped by around 7 percent, with steeper falls in Sydney
Bullock said the decline in prices coupled with record high
levels of household debt were not as yet a threat to financial
stability more broadly.
"The impacts are not large enough to result in widespread
problems in the financial sector," she said.
Most of the debt was well secured against property, even
with the decline in house prices, and repayments as a share of
income remained steady. Arrears rates were low and banks were
"Broadly, the debt is held by households that can afford to
service it," said Bullock.
One area of risk was in apartments, where a large amount of
new supply was coming on the market that could put further
downward pressure on prices.
"Currently, the risks here appear to be elevated but
contained," said Bullock.
The bank's liaison suggested that settlement failures had
not increased much and some developers were in a position to
hold and rent unsold apartments, she added.
(Reporting by Wayne Cole; Editing by Sam Holmes)
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