Treasurer Joe Hockey dismissed concerns about a housing bubble in Sydney and parts of Melbourne which could burst and hurt the country’s economy.
Mr Hockey explained that the real problem was one of supply and argued that market forces would solve the issue. The Treasurer added that there is no need for any more regulation above the current role of APRA, which has been trying since late last year to force banks to limit loans to investment borrowers, the Australian Financial Review reported.
Mr Hockey added that the elevated house prices in Sydney and parts of Melbourne can be mitigated with increased supply and claimed recent quarterly national accounts figures demonstratedthat there is a notable boost in housing supply.
The issue was provoked by Treasury Secretary John Fraser, who told a Senate committee that house prices in Sydney and some parts of Melbourne were “unequivocally” in a bubble. Former Commonwealth Bank CEO David Murray explained that if the bubble burst, the economy would be at risk.
However, John Flavell, head of Mortgage Choice, also dismissed concerns about a bubble and explained that, if it were real, there would be “a sudden and dramatic reduction in property prices over a very short period of time,” AFR noted. Mr Flavell judged that even though property in Sydney and Melbourne is expensive, it won’t get any cheaper.