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House price surge to cause ‘social and political problems’: ANZ
Rising house prices spurred on by low interest rates are “raising eyebrows” and could create “real social and political problems”, ANZ’s CEO has warned.
House price surge to cause ‘social and political problems’: ANZ
Rising house prices spurred on by low interest rates are “raising eyebrows” and could create “real social and political problems”, ANZ’s CEO has warned.
During an interview on 3AW on Thursday, ANZ CEO Shayne Elliott said the current housing boom could go on “for quite a while” given the high demand and ease of securing credit.
With house prices growing nationally by 2.1 per cent in February, Mr Elliott pointed out that savers are trying to get their foot in the market.
The strong growth rate has economists, including Commonwealth Bank’s Gareth Aird, predicting national house prices would rise by 16 per cent over the next two years.
According to Commonwealth Bank, national housing prices will lift by 9 per cent in 2021 and a further 7 per cent in 2022.
However, when questioned about whether the current boom is healthy, Mr Elliott said the answer would depend on "where you sit in the market".
"If you're an owner it probably feels pretty healthy. If you're trying to get in it probably doesn't.
“I think extreme moves, either up or down, are never probably very good if they’re sustained for a period of time. So, it’s starting to get into that area where people are starting to raise a few eyebrows, wondering if it’s a bit unhealthy at these levels.”
“Certainly, it can’t keep going at sort of double-digit rates for very long because you start getting real social and political problems as a result. And nobody wants that,” Mr Elliott said.
Due to the strong growth rate, Mr Elliott believes the Reserve Bank of Australia, which has previously stated its intentions to keep rates “lower for longer”, will need to lift the rate of credit prior to its 2024 target.
“You’d have to assume at some point, [interest rates will rise],” he said.
“I mean, why do we have this situation we’re in? We have inflation in the economy, it’s just asset price inflation. There’s a lot of money sloshing around, which was partly to do with COVID, partly to do with other things.
“All that money has to find a home and people are pouring it into assets. And they’re pouring it into housing and also into equity,” Mr Elliott said.
He noted that at some point in this environment, the growth in consumer prices with real inflation rises will cause the Reserve Bank to boost rates.
“And you pointed out a few in your preamble then. We’re starting to see a little bit of that, construction prices and all that other stuff and at that point, yes, the Reserve Bank would, I imagine would be forced to act at some point. I mean, they’ve sort of said they’re not intending to do that for a couple of years. But things change,” Mr Elliott concluded.
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