Overseas buyers absence hurts Australian property market: RBA governor Philip Lowe
The reduced flow of new arrivals to Australia is affecting some real estate markets, RBA Governor Philip Lowe noted in the July RBA meeting minutes released today.
He was referring primarily to the rental market, with vacancy rates increasing sharply in Sydney and Melbourne to just above four per cent.
Lowe cited the increase in the supply of rental housing in some areas.
He said soft conditions in the rental market were expected to weigh on rent inflation for some time.
The RBA members also noted conditions in the established housing market remained mixed.
"Housing prices in some larger cities had declined in June, though were only a little below recent peaks in the case of Sydney and Melbourne", Lowe said, adding that house prices in a number of smaller cities were broadly unchanged.
He said housing turnover has recovered somewhat after a "significant decline" when in-person auctions and open homes were banned owing to physical distancing restrictions.
Refinancing activity had risen sharply, Lowe noted, as borrowers had taken advantage of lower rates and the strong competition for lower-risk borrowers.
"Interest rates on new fixed-rate mortgages were noticeably lower than on new variable rate mortgages, which had led to an increasing share of new or refinanced loans on fixed rates", Lowe said.
"While some existing borrowers had deferred their loan payments, payments into offset accounts had remained high.
"This was consistent with many home loan borrowers saving for precautionary reasons and having reduced opportunities for spending."
Investor credit continued to contract, while credit extended to owner-occupiers continued to grow steadily at around the pace of preceding months. Lowe said credit growth overall was likely to slow in the months ahead, with commitments for new housing loans having fallen sharply in May.
"Members noted that this was consistent with weak economic conditions and the soft outlook for the housing market".
The RBA board also touched on how the elements of their emergency March policy package could have been configured differently.
"There has been variation across countries in the design of these measures.
"It would have been possible, for example, to set lower, but still positive, interest rate targets and to have purchased a quantity of government bonds above that necessary to achieve the bond yield target.
To read the full RBA minutes, click here.