PHOTO: RBA governor Philip Lowe says the recent house price fall is “unusual but not unprecedented”.

The Reserve Bank is maintaining it is the supply of and demand for housing that has accounted for most of the recent large swings in home prices, rather than the availability or cost of home loans.

Key points:

  • RBA governor Philip Lowe says the inflation-adjusted property price falls in the 1980s were larger than the current falls
  • Dr Lowe says dwelling construction did not keep up with strong population growth triggering the most recent boom in prices
  • The RBA says falling house prices are likely to reduce spending on new cars and household furnishings

The bank also remains deeply concerned about the low level of wages growth, saying that is more likely to be damaging consumer spending and the economy than falling home values.

Speaking at the AFR’s annual business summit, RBA governor Philip Lowe said property price falls of the scale seen in Sydney and Melbourne over the past year to 18 months have been seen before.