Treasury secretary John Fraser told a senate hearing today he has no doubt there is a property bubble in Sydney.
“When you look at the housing price bubble evidence, it’s unequivocally the case in Sydney. Unequivocally,” he told the hearing.
He warns bubbles have also formed in many parts of Melbourne, “Certainly I think that’s the case in the higher priced areas of Melbourne, and I base that on my own observation as well as the data,”
The warning follows a recent comment from ASIC Chairman Greg Medcraft, “History shows that people don’t know when they are in a bubble until it’s over”
Financial regulators have been working behind the scenes in recent months to implement macro prudential controls aimed at cooling the housing bubble and reducing the impact of a pursuing banking crisis. To their disappointment, little has been working. It is expected the RBA will hold off cutting the official cash rate when they meet tomorrow, waiting for any tangible evidence the first round of macro prudential controls is having an effect.