The Reserve Bank of Australia (RBA) has argued that a first home buyer’s “biggest enemy” is the rising home values and not jumps in interest rates.
Governor Glenn Stevens said it is important for the RBA that first homebuyers have the ability to enter the housing market when he was asked by a school student at a parliamentary committee hearing. The student asked if first home buyers will “get caught in a debt trap once rates start rising again”.
"The biggest enemy for first homebuyers is rising house values," Stevens said. "It's an important social issue how your generation will afford to house itself if you want to live in a city where the supply side of the market is unduly constrained."
He also urged for a "more innovative and more flexible" use of land in major cities like Sydney.
Another student asked about the bank’s protective measures for the next generation of homebuyers, to which Stevens answered “having more dwellings will help push the prices down”.
Meanwhile, deputy RBA governor Philip Lowe added the need for investment in more public transport to help first homebuyers.
"I think as a society one of the things we can do is invest more effectively in transportation to increase the supply of well-located land and put downward pressure on land prices and make housing more affordable," Lowe said.
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