Demand from hungry property investors puts central bank in tough spot
AS the weekend auction clearance rate in Sydney again topped 84 per cent, a study by the Switzerland-based Bank for International Settlements found central banks had increasingly used prudential rules to battle property market ‘‘booms and busts’’ instead of monetary policy. This comes as the RBA’s record-low interest rates set up a potentially uncomfortable position for RBA governor Glenn Stevens. The RBA would not want to raise rates to soften property prices while the economy was weak and after the jobless rate last week hit a four-year high, analysts said. And higher rates would boost the Australian dollar, further straining the economy’s transition to non-mining sectors such as manufacturing, tourism and housing . Led by a Sydney market that agents say is ‘‘hot’’, house prices are rising at an annualised rate of about 8 per cent due to demand from investors.
MICHAEL BENNET, GINA RUSHTON