AUSTRALIA'S house prices will soften but should not crash because of the world economic crisis, Reserve Bank governor Glenn Stevens says.
Answering a question from the floor at a business dinner in Melbourne last night, Mr Stevens said the ratio between house prices and household income was historically "very high", partly because Australia needed to boost its housing stock.
But in the United States, where house prices are dropping sharply, there is an oversupply of houses.
"I suppose that one difference that we have to the US is that they built too many houses and they have got to work off that excess stock, which is actually one of the things that has put them in the recession," Mr Stevens said.
"The rate of house constructions is at its lowest pont for 20 or 30 years, and the stock is coming down quite quickly now actually, but that is a painful process.
"We didn't build too many. We're probably not really building enough. That's what most of the experts say."
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Steve of Sydney But he said Australia's lack of a "supply overhang" was no guarantee prices would not fall.
"Indeed, prices probably are falling - gently," he said.
"But I think there are enough differences in the US versus Australia dynamic between the US.
"We certainly shouldn't assume there is going to be a crash but some combination of a general decline in prices and gradual growth of income (was expected)."
Mr Stevens gave a light-hearted response to another question about whether he preferred the stable economic situation when he was appointed in 2006 or today's more challenging times.
"It's certainly not dull. I'm hoping for boredom before much longer," he said.
Answering a question from the floor at a business dinner in Melbourne last night, Mr Stevens said the ratio between house prices and household income was historically "very high", partly because Australia needed to boost its housing stock.
But in the United States, where house prices are dropping sharply, there is an oversupply of houses.
"I suppose that one difference that we have to the US is that they built too many houses and they have got to work off that excess stock, which is actually one of the things that has put them in the recession," Mr Stevens said.
"The rate of house constructions is at its lowest pont for 20 or 30 years, and the stock is coming down quite quickly now actually, but that is a painful process.
"We didn't build too many. We're probably not really building enough. That's what most of the experts say."
Related Coverage
Time for home truths
The Australian, 5 Jan 2009
100 ways to profit in times ahead
The Australian, 3 Jan 2009
Funky towns
NEWS.com.au, 4 Jan 2008
Green homes within a generation - report
NEWS.com.au, 15 Apr 2008
'House prices unlikely to fall 30pc'
NEWS.com.au, 3 Dec 2008 Your Say
Loretta, I do not think you can possibly compare the cost of house prices to an average annual salary. Instead you should look at the ratio of how much of an annual salary is being...
(Read More)
Steve of Sydney But he said Australia's lack of a "supply overhang" was no guarantee prices would not fall.
"Indeed, prices probably are falling - gently," he said.
"But I think there are enough differences in the US versus Australia dynamic between the US.
"We certainly shouldn't assume there is going to be a crash but some combination of a general decline in prices and gradual growth of income (was expected)."
Mr Stevens gave a light-hearted response to another question about whether he preferred the stable economic situation when he was appointed in 2006 or today's more challenging times.
"It's certainly not dull. I'm hoping for boredom before much longer," he said.
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