The Real Estate Institute of NSW (REINSW) has hit out at the Reserve Bank for not doing enough to disincentivize risky lending to property investors. Recently the central bank has warned of an overheating market due to foreign investors. This comment thereby hinted at imbalanced investor activity in the property market.

REINSW President Malcolm Gunning told, “Now that the public is buying properties with confidence, the RBA has changed its mind and is being critical, giving warnings about investing in an over-inflated market.”

The record low interest rates and high house prices are a dream-come-true for realtors: Rock bottom interest rates attract investors into the market; record house prices fatten their commissions. So it’s no wonder the real estate industry has reacted angrily to RBA Governor’ Glenn Stevens words of caution.

Mr Gunning believed the RBA knew a certain element of risky loans would result from their slashing interest rates in 2011. Why weren’t warnings given then?

REINSW President Malcolm Gunning. Image:

REINSW President Malcolm Gunning. Image:

“Why didn’t they do it earlier?” said Mr Gunning, “Why wouldn’t you foreshadow it up front, and be a little bit more discerning?

“There should have been measures put in place knowing that the property market was going to scoot.”

The RBA has cautioned banks to stick to sound lending policies as speculative investors threaten to overwhelm the market. House prices have been soaring and many investors wish to try and turn a quick profit – further turning up the heat.

The recent comments from Glenn Stevens may have a cooling effect on the property market. Something realtors don’t want. After all, they lose nothing form a mortgage default.

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