The Reserve Bank of Australia has warned home owners to be wary of taking on too much debt to buy a property, especially in light of a sharp rise in Sydney prices.
RBA governor Glenn Stevens on Friday said that while current levels of household debt weren't "disastrous", he would be worried about an acceleration in credit growth to home buyers.
"It's (household debt) pretty high now and we'd, surely, be asking for trouble if we saw a big step up from where we are," he told federal politicians of the House Economics Committee in Sydney.
"People need to keep in mind that prices don't just rise, they can fall, they have fallen and we need to be careful that we don't take on too much leverage," he said. Advertisement
Mr Stevens said that while housing affordability had improved in recent years due to interest rate cuts and a soft housing market, buying a home had become less affordable recently due to a runup in prices, especially in Sydney.
He also there was strong demand from foreign investors for houses in Australia's major cities, but the impact on house prices seemed to have been overstated.
"In particular parts of our cities, the role of foreign investors is quite prominent indeed, but I suspect rather less prominent than some of the headlines might suggest," he said.
