House prices in Sydney and Melbourne are reaching worrying territory, says the head of Australia’s corporate watchdog.
Australian Securities and Investments Commission (ASIC) chairman Greg Medcraft told The Australian Financial Review the self-managed super industry is especially exposed to a correction in property prices.
"History shows that people don't know when they are in a bubble until it's over," Mr Medcraft told AFR.
"I am quite worried about the Sydney and Melbourne property markets. In housing, the long-term average income to average price ratio is four to five times but at the moment it is at historic highs," he said.
Some policymakers and market observants have been concerned that the steady increase in property prices, particularly in Sydney and Melbourne, has more to do with speculators taking advantage of record low interest rates rather than a fundamental endorsement of the market’s long-term prospects.
The federal government has flagged curbing the extent to which self-managed super funds can borrow to buying housing, but a ban is not being pushed.
Concerns for the property market in New Zealand are also resulting in policy action.
Over the weekend, Prime Minister John Key announced that profits on properties sold less than two years after purchase will be taxed, excluding family homes.