Falling house prices 'perfectly normal'
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February 17, 2006 - 1:35PM
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Falling house prices in some places are "not a cause for alarm", the nation's top central banker says.
Reserve Bank governor Ian Macfarlane said the central bank had no troubles with the slowdown in the housing market, including where prices for homes had actually fallen.
"The fact that on average over the country house prices are flat is something that gives us some encouragement," he said in evidence to a parliamentary committee today.
"The fact that they are falling in some places is not a cause for alarm in our view, particularly if they're falling in the place where they previously had the biggest boom, that seems to me perfectly normal."
In his semi-annual parliamentary testimony, Mr Macfarlane said the risk to the economy posed by an overheating housing market had eased.
"Household credit growth has eased back to an annual rate of about 12 per cent, and - although this may still be regarded quite high in absolute terms - it is towards the lower end of the range in which it has fluctuated in the past two decades," Mr Macfarlane said.
Mr Macfarlane said there are some tentative signs that credit and housing market conditions have firmed a little in recent months.
"(However), the risk to the economy posed by the overheating in housing and credit markets in the period after late 2003 has eased," he said.
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