RBA holds cash rate at 2%

The Reserve Bank of Australia (RBA) has kept the official cash rate at 2% for June.

The RBA last cut rates in May and February.

“With the RBA focusing on stimulating economic growth, dragging the Australian dollar lower and lifting consumer spending, they are likely to focus less on the growth in the housing market,” CoreLogic RP Data head of research, Tim Lawless said.

“The RBA is likely to look through the pause in the rise of dwelling values reported by CoreLogic RP Data for the month of May, paying more attention to the strong upwards trend that has been evident in Sydney and Melbourne since mid-2012. 

“Dwelling values have risen by 39% in Sydney and by 22% in Melbourne over the past three years, while the other capital cities have seen much more sedate conditions. 

“At a time when interest rates remain low, there is the expectation that tougher lending requirements to investors as well as higher supply levels will start to cool housing market conditions and bring the rates of capital gain back to more sustainable levels across the two largest cities where growth in dwelling values has been the highest,” Tim Lawless said 

More time is needed to see if historic low interest rates are impacting on property markets outside of Sydney and Melbourne, according to the real estate network LJ Hooker.

LJ Hooker CEO Grant Harrod said the Reserve Bank of Australia’s decision to wait for May’s cut to influence the economy was sensible, despite weak business investment figures. 

He believes an interest rate cut is now more likely at the end of the year, if needed, to stimulate the economy.

“We haven’t seen any signs but it is too early to call if it’s had any positive effect in cities such as Perth and Canberra – it could take another three to six months,’’ he said.

In Sydney, a lack of listings combined with historic low interest rates are continuing to bring record numbers of people to open inspections and push up property prices. 

Mr Harrod believes it has evolved as a unique market and is likely protected from any ‘bubble’ due to a lag in DA approvals to match population growth.

“The biggest issue facing all agents at the moment is the lack of listings and the proliferation of buyers,” he said.

“The total number of properties available for sale across the LJ Hooker network is down by about five percent and the industry has dropped 5.5%.”

This article first appeared on Property Observer.