RBA holds again as brisk housing price growth starts to ease: June 2017

RBA holds again as brisk housing price growth starts to ease: June 2017
RBA holds again as brisk housing price growth starts to ease: June 2017

At its meeting today, the Reserve Bank Board decided to leave the cash rate unchanged at 1.5 percent.

RBA Governor Philip Lowe said that conditions in the housing market vary considerably around the country.

"Prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease," he said.

"In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years."

Tim Lawless, CoreLogic head of research, said while the cash rate has remained on hold in June, financial markets are starting to lean more towards a cut in official interest rates rather than a stable rate setting.

"Importantly, one of the key barriers to rate cuts - the hot housing markets of Sydney and Melbourne - have shown signs of slowing," he said.

"CoreLogic has reported only one month of negative dwelling value movements, albeit during the seasonally weak month of May.

"However, if this recent slowing develops into a more sustained trend, the RBA may be able to consider alternative scenarios to a steady cash rate.

"The last time rates were cut, which was May and August of 2016, the housing market reignited with capital gains accelerating and investors surging back into the market.

"The situation is very different now, with new macro prudential regulations dampening investment demand while mortgage rates have stepped higher, particularly for investors and interest only borrowers.

"The housing market will be the subject of much scrutiny over coming months, particularly the Sydney and Melbourne markets where CoreLogic figures show dwelling values have risen by approximately 75 percent and 55 percent respectively over the past five years.

"A longer trend of slowing value growth and overall softer housing conditions will lend further support to the notion that house price growth has moved through its cyclical peak and may take some pressure away from the RBA to keep rates steady especially given that other sectors of the economy other than housing seeming need interest rates set at a lower level to what they currently are.”

AMP Capital chief economist Shane Oliver took to Twitter.

"RBA on hold as exp: slower Q1 growth but to still exps rise to 3% growth; slower growth in wages constraining holds; signs of easing in Syd & Melbourne," he tweeted.

"RBA bias still looks neutral overall. Our view remains rising risk of another rate cut given soft consumer, wages & inflation. Housing to slow."

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