Cooling house prices in Sydney won't spark a property market bust, the Reserve Bank boss says.
RBA governor Glenn Stevens says he welcomes the nation's two housing hot spots, Sydney and Melbourne, taking "a breather" from the recent surge in prices.
"I don't think that's going to be developing into some kind of rout in property," Mr Stevens told the House of Representatives economics committee on Friday.
"Obviously we don't want a crash, but I think the pace of growth that we did have, you'd have to really worry if that continued on and on."
This time last year, Mr Stevens expressed concern about Sydney's soaring house prices, saying they were the "biggest enemy" of first home buyers.
However, his concerns didn't deter the RBA from cutting its cash rate to a record low 2.0 per cent in May in a move that reignited concerns about how lower interest rates would add fuel to an already blazing hot Sydney housing market.
While the RBA has held its cash rate steady since then, Mr Stevens says the central bank maintains an easing bias.
In contrast, the big banks and other lenders lifted their mortgage rates last November, citing the need to raise extra cash to help protect them from future financial shocks.
Mr Stevens doesn't think there's a strong case for banks to hike their interest rates again any time soon.
"I don't really see much of a case for independent increases in lending rates based on funding costs," Mr Stevens said.
"It makes it a bit more complicated for us. It doesn't mean we can't have the influence but it means we have to configure the rate that we set, making some allowance for the behaviour (of) the banks."
The nation's top central banker is happy though that regulatory measures introduced last year to restrict annual growth in investor mortgage loans to 10 per cent are working.
He says the move has had a positive impact on the property market, adding that he believed the measures were "enough for the time being".
However Mr Stevens urged caution when one committee member suggested measures should be introduced to contain surging house prices amid concerns about affordability.
"As a principle I'm open to various new instruments, but we need to keep in mind who's going to wield them, how and to what end," he said.
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