23 Aug 2011

Slow response to housing shortages seen as problem

12:06 pm on 23 August 2011

A submission by the Reserve Bank to the Productivity Commission's inquiry into housing affordability has pinpointed the slow response of developers to housing shortages as a significant problem.

The Reserve Bank says developers have been quick to respond to rising house prices by building more houses.

But the bank says developers are sensitive to rising costs, have poor productivity, and only get into gear as prices are rising.

It says surges in immigration have amplified house price increases.

Lax monetary policy, increases in Government spending during economic boom times and tax incentives have an effect, but are less relevant.

The Reserve Bank says regulating the amount that banks can lend on houses would only likely have a moderate effect on high prices.

The Productivity Commission is due to report back to the Government early next year.