21 Nov 2013 ABC Business News in Brisbane – The International Monetary Fund has cautioned that the recent surge in Australian property prices and rising investor expectations could cause values to “overshoot”.
While the IMF does not point to a property bubble in the hot markets of Sydney, Melbourne and Brisbane, it is urging regulators to scrutinise property investment to ensure banks maintain strict lending standards.
“Attention should be paid to the risk – as in any situation where asset price inflation accelerates – that a prolonged period of rapid price growth could give rise to expectations-driven, self-reinforcing demand dynamics and price overshooting,” the IMF said in a statement.
“A sudden house price decline, were it to occur – possibly triggered by a shock to household incomes and borrowing costs – could reduce consumer confidence and impact overall economic activity.
“The authorities would need to be prepared to take preventative actions if household credit growth, transactions volume, and prices accelerate.”