Housing The RBA acknowledges that housing is one of the major...

1. Housing

The RBA acknowledges that housing is one of the major sources of downside and upside risk for the Australian economy.
House price growth picked up over the second half of 2016, particularly in Sydney and Melbourne, which could lead to stronger spending and renovation activity. But the risk of a housing downturn is ever present and if one occurs then a “significant number of projects currently in the residential construction pipeline” may be delayed or even cancelled.

Investor activity in residential markets is currently quite strong but the RBA acknowledges that “history shows that sentiment can turn quickly, especially if prices start to fall.” Historically low rental yields and falling rents across some cities suggest that valuations are stretched.