The largest one-month jump in house values in 17 years and a surge in new home loans has prompted warnings the property market is at risk of overheating and could force the Reserve Bank to reassess record-low interest rates.
Some economists believe the RBA, which meets on Tuesday, may have to start lifting rates as early as next year to deal with house prices, which rose 3 per cent in Sydney and 2.5 per cent in Melbourne last month.
Westpac chief economist Bill Evans said low interest rates would remain part of the economic landscape for a long time.
“RBA policies are needed to remain stimulatory for a number of years; macro-prudential policies to deal with damaging asset bubbles should be applied if necessary with a view to a ‘soft landing’ for markets rather than the sharp deterioration we saw in 2017-19,” he said.