The Real Estate Conundrum for the RBA

http://www.theaustralian.com.au/business/opinion/alan-kohler/the-chuffed-and-the-chuffednots/news-story/db5439d1c3f9b4cae62d0ba8cb084959

An interesting article here by Alan Kohler. So rent is not increasing by much due to increased supply of rental properties while at the same time there is much growth in real estate prices. Low rental growth feeds into the CPI keeping downward pressure on interest rates in an attempt to lift CPI. Yet booming house prices due to low interest rate environment gives cause for a rate rise! What to do?
Firstly, I might dare suggest, it could be time to fix your home loan rates. (Disclosure; I am a mortgage broker. This is not personal advice.)
Secondly, in speaking with bank business managers and from observation, I’m not convinced that allowing foreigners to buy our property is helping Australian housing affordability. While individual examples may not reflect the broader case, even this article telling illustrates that a couple from Hong Kong bought the apartment in Kew, Vic. We hear regularly of Chinese home buyers snapping up homes at prices Aussies couldn’t afford. With some 200Mn Chinese in their Coastal Economic Zone growing in personal wealth with significant numbers already cashed up and wanting a slice of the Australian Real Estate market, their are still 1.1Bn Chinese yet to become a part of the the Chinese Economic Miracle. We need to understand that there can be no end to Chinese demand for our property. It would be possible and economically feasible for every single Australian property to be owned by the Chinese and still their insatiable appetite not be satisfied.
Without being racist or Sino-phobic, I think it’s time to re-examine our foreign investment rules when it comes to the purchase of residential Real Estate. Business investment and development should be OK but for the sake of housing affordability for Australian nationals, I believe it may be prudent to limit home ownership to Australian nationals.

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