Housing prices easing - especially Sydney - so another hold at September 2017 RBA meeting

Housing prices easing - especially Sydney - so another hold at September 2017 RBA meeting
Housing prices easing - especially Sydney - so another hold at September 2017 RBA meeting

The RBA cash rate decision came out at 2.30pm today - and rates were held again.

The bank's last move saw it go to 1.5 percent at the August 2016 meeting, so rates have been held steady for 13 meetings.

It is not the longest run of steady rates as there were 16 meetings (inclusive) between their August 2013 meeting and December 2014 where they held at 2.5 percent. There was another run of 16 meetings between July 2002 and October 2003 where rates were held at 4.75 percent.

The board noted conditions in the housing market continue to vary considerably around the country.

"Housing prices have been rising briskly in some markets, although there are signs that conditions are easing, especially in Sydney.

"In some 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."

It noted rent increases remain low in most cities. Investors in residential property are facing higher interest rates.

"There has also been some tightening of credit conditions following supervisory measures to address the risks associated with high and rising levels of household indebtedness.

"Growth in housing debt has been outpacing the slow growth in household incomes."

CoreLogic head of research Tim Lawless commented the ongoing evidence of slower housing market conditions were likely one of the key topics of conversation for the RBA when they held the cash rate at the historically low level of 1.5% in September. 

CoreLogic home value figures released last Friday confirmed that the pace of capital gains has slowed in Sydney and Melbourne. 

These are the two housing markets that have caused the most concern for policy makers because of the previously high rates of capital gain that had been running since early 2012, coupled with record high levels of household debt and high concentrations of investment.

With growth conditions across the housing sector moving back to a more sustainable level of growth, the likelihood of a cash rate hike in 2017 appears highly unlikely, Lawless said. 

Record high household debt remains a key concern for policy makers.

Furthermore, wages growth is continually subdued, he noted. 

With the household debt to income ratio tracking at 190%, households have become more sensitive than ever to the cost of debt and the RBA will likely be very mindful of the capacity for Australian households to service their debt without a broader dent on household consumption. 

Mortgage rates are already pushing higher for investors and interest only borrowers, which is likely a key contributor to the slower housing market conditions in Sydney and Melbourne. 

Importantly, mortgage rates for owner occupiers are generally unchanged, and for some products have actually fallen over recent months. 

Lawless said the hold decision will be welcome in markets outside of Sydney and Melbourne where growth conditions have generally been mild to negative and the macro prudential conditions being imposed nationally due to the strength of these two cities is generally seen as a negative for other housing markets across the country.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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