The Reserve Bank has warned Australia could face a resurgence of house price inflation, as construction lags and the economy recovers.
In a speech to the Committee for Economic Development of Australia on Tuesday, the Reserve’s head of economic analysis, Tony Richards, said there was a risk of ”undesirably strong growth” in house prices unless construction caught up with a surge in demand.
”Six months ago the concern was we would see unhealthily large declines in asset prices, but clearly that threat has passed,” Dr Richards told the conference. ”When the price of housing rises, higher-income households tend to benefit at the expense of lower-income households.”
Dr Richards said one reason for the housing shortfall was the difficulty and cost of developing land and that governments should do more to improve public transport and infrastructure in order to encourage development.