Macroprudential measures enacted since 2014 have put the four major banks in a position to cope with any future falls in house prices, according to the RBA.
Speaking at a Bloomberg event in Sydney yesterday, RBA assistant governor (financial system) Michele Bullock said Australia's regulatory bodies are watching rising house prices "very carefully".
Ms Bullock acknowledged that house prices are beginning to "pick up again" and the RBA (along with APRA, Treasury and ASIC) are "considering whether we might need to do more".
APRA began to put restrictions on residential mortgage lending in 2014, with a particular focus on investor loans. ASIC has also tightened its rules on responsible lending practices.
The macroprudential measures initially resulted in the proportion of investor loans falling below 10 per cent, but more recently that number has "started to spring up again", Ms Bullock said.
Nevertheless, the balance sheets of the four major banks (which APRA deems to be "systemically important") are now much more "resilient" to any potential housing downturn, she said.
"We're not not saying there won't be any losses, and it's not saying there will be no risks. But we are saying: if there is some sort of shake-out, these financial conditions won't dramatically affect the health of the economy," Ms Bullock said.
From a systemic standpoint, one of the big concerns for the RBA is that housing may be a 'procyclical' issue for the Australian economy.
"Is there evidence that people see prices rise and they think prices will always rise?" Ms Bullock asked.
If that is the case and speculators are "chasing prices", any housing slump would be "much bigger than it would otherwise be", she said.
Investors tend to be the first people to sell when house prices begin to dip, Ms Bullock said.
"We're focused on whether things might be procyclical and whether or not there are implications for the resilience of household balance sheets and banking balance sheets as well," she said.
Investor confidence is on the rebound and the ASX hit a 12-year high on Monday. But it’s not all good news for the Australian economy. ...
While the Asia-Pacific region, excepting Japan, saw the world’s strongest dividend growth in the past decade, Australia has barely shown a...
One fund manager will release a new exchange-traded fund that will provide investors access to one of the fastest growing economies in the w...