Reserve bank deputy governor seems to have the right idea. - In...

Reserve bank deputy governor seems to have the right idea. -

In an address last month, Mr Stevens focused on the rush of investors into the residential property market.

"These are people who presumably have been attracted by perceptions of capital gains and tax advantages of leverage, and who recently may have been disappointed with returns in the share market. Nearly 50 cents of every loan dollar approved for housing purposes is now going to investors, which is unprecedented," Mr Stevens said.

He asked whether housing values could continue rising.

"Ultimately, there has to be an income stream that anchors asset values. In the case of investor housing, that stream is, of course, the rent on the property.

"Rental yields have fallen noticeably in recent years and there is widespread talk of rentals being under continued downward pressure at present, as the supply of dwellings for rent outstrips demand – something that appears likely to continue, and perhaps intensify, for a while at least," Mr Stevens said.

"It is getting harder and harder to believe the prospective returns from that outlook are high enough sustain valuations, which are so high relative to historical experience, or to warrant the $4-5 billion being loaned to investors each month," he warned.