The Reserve Bank of Australia must not hold the Australian public to ransom by using interest rates to curb high property prices, according to the Real Estate Institute of New South Wales.
"We are very disappointed that RBA Governor Glenn Stevens is trying to restrict investment in property by sending out warnings about buying property," REINSW President Malcolm Gunning said.
"Six months ago, Mr Stevens was encouraging investment in real estate. Now that the public is buying properties with confidence the RBA has changed its mind and is being critical, giving warnings about investing in an over inflated market.
"We are not only disappointed that the RBA is giving investment advice, but that they have singled out property.
"The fact is that investors are more confident about putting their money in Australian property compared to the uncertainty of the share market and the underlying mistrust of this sector following on from the GFC.
"While we admit that low loan-to-value ratios (LVR) of 5 per cent are dangerous, and that this practice should be curbed by the banks being asked to be more responsible with their lending, it is not the RBAs place to use interest rates to restrict the property market.
"Using a broad tool such as interest rates to affect one sector of the market is unjust on all areas of the market and is inappropriate," Mr Gunning said.
"For too long, interest rates have been used as a quick fix. The RBA moves interest rates for employment, terms of trade and currency. They use a broadsword approach, but must be more targeted by providing guidance for lending institutions rather than making the whole economy suffer.
"The RBA must continue to keep interest rates on hold for the foreseeable future to help continue to boost the flagging economy," Mr Gunning said.
For further information or to arrange an interview with REINSW President Malcolm Gunning, please contact: Helen Hull 0419 642 961 or [email protected].