Brokersite

The housing market could be the next sector to come under the purview of the Australian Securities and Investments Commission, if its chief economist has his way.

ASIC’s head number-cruncher, Alex Erskine, has suggested that oversight of the housing market would be “the next logical step” for the regulator, given the role the market played in the financial crisis.

Erskine argued in a paper that the housing market should operate on principles similar to those of stock exchanges. This, he suggested, would would help increase transparency while reducing dramatic distortions in pricing for homes. It would also allow for the rise of products that allow consumers to hedge house price risk, as they can in equities and currency markets.

“The housing market played a key part in the financial and economic boom and bust,” said Erskine in the paper, which was prepared for other securities regulators around the world following a recent meeting.

“It seems set to continue to pose an acute challenge in the recovery period, with concerns over price bubbles and excessive borrowing and speculation in some economies and the consequences of previous excesses still washing through other economies,” he added.

ASIC has stressed that the comments released were its chief economist’s personal views.

The housing market may soften over the next 12 months but prices are unlikely to drop.

Macquarie Bank’s latest general economic outlook states that while rising interest rates will see the property market slow over the next year, a dramatic price correction would not be triggered.

The main reason for this, said the report, is the issue of supply. It said while 150,000 houses had been built each year since 2005, the population had grown by more than 350,000 a year.

“The most obvious starting point in addressing the sustainability of house price growth in Australia is the structural supply and demand imbalance,” the report said. “Essentially, there are not enough new houses being built to accommodate a rapidly growing population.”

The report also commented that very low mortgage arrears rates suggested that Australian households had coped well with current debt levels.