Could another rate cut be on the horizon?

Could-low-interest-rates-help-with-selling-your-house_157_6015316_0_14100812_300When the Reserve Bank of Australia (RBA) decided to cut the cash rate in May, there was a collective sigh of relief – from those buying a house or apartment, at least. Housing finance has become incredibly cheap, allowing households to pay off their loans more quickly and encouraging others to make their first, crucial steps into the property market. The bank followed on from this announcement in June, retaining the record low cash rate and keeping nerves at ease.

However, what wasn’t so certain out of the RBA’s decision was whether the bank would continue chopping interest rates – or if in the not-too-distant future, they would start rising again. Luckily for home buyers, investors and residential sales across the country, the recently released minutes of the RBA June board meeting could suggest that it’s in favour of easing monetary policy.

Will Sydney house prices have an impact?

Despite the impressive growth being seen in Sydney, the minutes suggest that Governor Glenn Stevens is more concerned with fostering property markets in other capital cities. While the Harbour City has been powering ahead, only Melbourne has come close to the same level of capital growth.

In fact, figures from CoreLogic RP Data show that prices in the New South Wales capital expanded 16 per cent over the last 12 months, and the median selling price of a house is 30 per cent higher than it is in Melbourne. With these figures in mind, it’s little wonder investors are scampering to secure themselves a piece of Sydney’s property market.

However, in a public lecture at the Australian National University, Assistant RBA Governor Christopher Kent said it’s this demand, mixed with a lack of supply, that’s causing a fair amount of concern. Mr Kent highlighted that low interest rates can give dwelling construction a boost, but Sydney is still seeing a shortfall in the number of homes being built – something that could keep prices rising.

“In some cities, stocks of unsold lots suitable for development appear to be unusually low,” Mr Kent said.

“Shortages are most evident in Sydney, where greenfield land releases have not kept pace with recent strong demand.”

However, the RBA minutes show that Sydney isn’t the only consideration. The bank also weighed up global financial conditions, domestic consumption, population growth and employment in their decision – and many of these factors aren’t expected to shift dramatically. For instance, Mr Stevens pointed out that inflation is well within target, and low interest rates are helping household expenditure.

“In assessing domestic conditions and the international environment, the board’s assessment was that the stance of monetary policy should be accommodative,” Mr Stevens said.

No bubble in sight

Sydney might be getting a fair amount of publicity, but the Australia Bankers Association (ABA) doesn’t believe that the current growth is anything out of the ordinary. In fact, a new ABA report suggests that growth in Sydney and other capital cities is following a familiar cycle. Low interest rates have boosted home values in the past, and the report points out that real estate hasn’t soared above the peaks seen before the global financial crisis.

“Since the GFC there have been two episodes of quite marked national declines in prices, followed by strong rebounds,” the report reads.

“The latest acceleration in prices is consistent with this historical cycle.”

In fact, the ABA found that while the latest rate cuts could propel values forward, they look likely to help household finances. This might mean Australians, including Sydneysiders, could actually be well prepared to take on a mortgage and buy a house. This could have a positive impact for those selling their house, too. With house hunters feeling the benefits of the rate cut, there could be more competition for your home – an encouraging mix for a successful sale.

Whether you’re purchasing a home, expanding your portfolio or selling up, your local real estate agent can lend a helping had.

Leave a Reply

Your email address will not be published. Required fields are marked *