No longer 'subdued, 'soft', or 'declining', but 'firming': RBA’s Glenn Stevens has a new perspective on the housing market

RBA governor Glenn Stevens had only a little to say about the housing market in his monetary policy decision statement after leaving the cash rate on hold at 3.5%, but the brief mention he gave the property market was the first positive-leaning observation in months.

It was against the backdrop of observations that the rate of unemployment has thus far remained low, inflation remains low, and the outlook for inflation is expected to be consistent with the target over the next one to two years.

Noting monetary policy was currently easier than it was for most of 2011, the governor indicated interest rates for borrowers were a little below their medium-term averages.

The key sentence for property investors and home buyers was:

“While it is too soon to see the full impact of those (interest rate) changes, dwelling prices have firmed a little over the past couple of months, and business credit has over the past six months recorded its strongest growth for several years.”

The governor’s assessment that the housing market had firmed a little over the past couple of months contrasts quite strongly with the terminology used to the describe the housing market in past months.

Only a month ago, in the July 3 statement he referred to the housing market as “subdued”; in June he said it had “recently declined again”; in May he again called it “subdued” and back in April he described it as “soft”.

You have to go back to February for any vaguely positive outlook about the housing market, when Stevens noted that “housing prices showed some sign of stabilising at the end of 2011”.

In the December 2011 statement prior to February's, Stevens noted that “credit growth remains subdued and asset prices have declined further over recent months”.

While hardly jumping up and celebrating a revival in the housing market, Stevens may be hinting that, just possibly, the market may have turned the corner.

No doubt, Stevens would have taken note of the 0.6% and 1% capital city growth figures recorded by RP Data-Rismark in July and June as well as the o.5% June quarter growth recorded for capital city house price by the ABS, as well as its str0nly upwardly revised March quarter figures.

All eyes will now turn to the next batch of monthly figures from RP Data-Rismark for August (released on September 1) to see whether the recovery can be sustained for a third straight month (without the inducement of a rate cut) when the spring selling season commences.

Some earlier indications of a firming market may be seen in housing finance data for June released by the ABS tomorrow.

Economists polled by Bloomberg last week are forecasting a 2% rise in the number of home loans sold over June after 1.2% fall in May.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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