The Reserve Bank cautioned the borrowers and lenders to be careful while offering an assurance that there is no possible housing bubble in Australia. However, the fears of property bubble were felt soon after the house price index (Australian Bureau of Statistics) increased by 20% during the year ending March.

Despite this, Luci Ellis, the RBA head of financial stability asserted that the Australian house prices had recovered from a small decrease during the year 2008. Moreover, the house prices in capital cities witnessed an increase of 12-15% as compared to the year 2008.

Ms Ellis said recent data suggested Australia does “not have a credit-fuelled speculative boom on our hands”.

“It would not be desirable for the current situation to turn into one,” she said in a speech.

“It will therefore be important for lenders to remain prudent in their standards.

“It will be equally important for prospective borrowers to have realistic expectations, and not to rely on a hoped-for capital gain in order to service their debts.”

During a residential property conference, she urged that housing prices in Australia had been under increasing pressure since majority of short-term drivers came from demand side. This was subsequent to an improved first home-buyers grant, lower than projected unemployment and low interest rates.

“The nature of the demand shock Australia faces means that it would be helpful if more of that demand could be accommodated with extra homes for occupation, instead of by higher prices,” she said.

“Some of that pick-up in construction does seem to be happening.”

She said the supply of housing was always going to be quite “sluggish”.

“But whatever the causes, the ability to add to supply is falling short of this higher rate of population growth, despite some pick-up recently,” she said.

“Naturally that is putting upward pressure on housing prices.”

Ms Ellis stated that it would be advantageous for the supply of new housings to be more flexible than it had been up till now. This is because more people needed a place to live. Moreover, both the prices of houses as well as rents could witness an increase.

The more that housing prices rise, the more some people might feel they must stretch their finances to buy a home, she said.

Paul Castran and Mark Forytarz, the two renowned personalities from Castran Gilbert have a lot of experience in the field of real estate. Both of them presided over many real estate sales. Mark Forytarz and Paul Castran share their views about the happenings of real estate market.