Freer Property and Finance

Do you agree that Reserve Bank Governor Glenn Stevens has a dilemma -  if he continues raising interest rates in order to quell demand, the effect is to also delay delivery of new product? Developers are cautious about lodging building approvals when buyers are withdrawing from the market (assuming they can even obtain construction finance in the tighter credit environment). The nascent recovery in the Sydney building industry is threatened by a too hasty normalisation of cash rates combined with the withdrawal of government incentives, the net effect of which will be diminished supply and a return to rising prices as well as house price inflation.

Interest rates may not rebound as quickly as many Australian commentators predict, due to slower company earnings coming out of the worst recession since the Great Depression.