Housing market still in “very good shape” despite “sizeable” May fall: Christopher Joye

Property investors should not be too alarmed at the 1.2% fall in capital city house prices recorded over May by RP Data- Rismark, suggests economist Christopher Joye.

Weekly auction clearance rates suggest the housing market remains “in very good shape” writes Joye in The Australian Financial Review today.

He says the latest decline may be the result of people “questioning the outlook” following the May 7 rate cut – as happened a year ago, when consumer confidence “barely budged” and house prices fell 1.1% despite a surprise double (50 basis points) rate cut on May 2.

“It took until June and July for house prices and consumer confidence to belatedly respond,” writes Joye.

Joye says it would be a “real surprise” if house prices and mortgage lending did not rise in the coming months spurred on by low mortgage rates below 5%.

His comments suggest the RBA won’t response to the latest housing market data with a rate cut given the recent weakness in the Australian dollar give it a “more accommodative policy stance than it originally planned”.