That's what the Reserve Bank of Australia (RBA) seems to think.
Deputy governor Philip Lowe said yesterday that the huge growth in land and property prices, particularly in recent years, has handed many Australians windfall gains. Older homeowners, including those with no children and those with investment properties were benefitting at the expense of our younger generation.
First homebuyers are being priced out of most property markets according to the statistics, while the strong rise in loans to investors has prompted the banking regulator Australian Prudential Regulatory Authority (APRA) to enforce a 10% limit on investor loan growth.
The big four banks, Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) have also taken steps to increase interest rates for investor mortgages, in an effort to slow growth.
Renters are also predicted to be worse off and facing higher rents, according to Mr Lowe. "Many parents around the country look at the high housing prices and worry that their children will not be able to afford the type of property that they themselves have been able to live in, even if their children were to have the same life-time income profile as they have had," he said.
Mr Lowe argues that the main impact of higher land prices is not really increasing our national wealth, but the redistribution of wealth across generations.
Current property owners benefit from capital gains but future generations will suffer through paying higher housing costs.
Foolish takeaway
Unfortunately, I suspect Mr Lowe could have argued that case 50 or 100 years ago too, and that parents have almost always worried that their children won't be able to afford the type of property they lived in. But that hasn't stopped people buying houses, apartments or property.
What may change over time is the type of housing we want to live in. No longer do we need quarter acre (1,000 square metres) blocks for every family – which may have been seen as essential in times past. Property markets also run in cycles. While property prices might be running hot now, many seem to forget that Sydney house prices have fallen by more than 10% twice since 2008.
Looks to me like the RBA is jumping at shadows again.
