Dwelling prices still “relatively flat” but housing market "appeared to be improving": RBA minutes

House and unit prices have remained “relatively flat over recent months” though "still higher than the previous year" the minutes of the June 4 RBA board monetary policy meeting reveal.

However, signs of a pick-up in household appetite for borrowing and a “range of housing market indicators” suggested to the RBA the “housing market generally appeared to be improving” following previous cash rate cuts.

At the June 4 meeting the RBA left the cash rate unchanged, but the minutes reveal it discussed the possibility of further rate cuts noting that the “inflation outlook as currently assessed might provide some scope for further easing, should that be required to support demand”.

Overall with respect to the housing market, the June minutes were similarly upbeat as they were in May with members observing “that the effects of low interest rates had been evident in a range of housing market indicators”.

“Building approvals for both higher-density and detached dwellings had increased over recent months.

“The Bank's liaison contacts were generally becoming more positive about the outlook for dwelling investment.

“Also, loan approvals had grown more strongly in recent months, including for new housing, and auction clearance rates were well above average in Sydney and had picked up to be a bit above average in Melbourne.

“While measures of dwelling prices had been relatively flat over recent months, they were still higher than the previous year,” say the RBA minutes.

The RBA board also notes that following the decision in May to reduce the cash rate target by 25 basis points, “most lenders in Australia had subsequently lowered their standard variable housing rates in line with the reduction in the cash rate”.

“This resulted in lending rates for most households and businesses reaching or approaching historic lows.

“There were also signs that the appetite for borrowing in the household sector was picking up, and the housing market generally appeared to be improving, as the effects of the most recent and earlier reductions in the cash rate worked their way through the economy,” says the RBA.

In the minutes accompanying the May 7 decision to cut the cash rate by 25 basis points to a 53-year-low of 2.75% the RBA noted that “conditions in the housing market remained generally positive” with dwelling prices “around 4% above their trough in mid-2012”, and that auction clearance rates had increased.

It also noted an improvement in the mortgage market and that the pick-up in demand for new housing was improving “with enquiries from prospective purchasers and visits to display homes increasing”.

“New dwelling investment had increased since the middle of the previous year, with members observing that approvals for higher-density dwellings had increased, while approvals for detached dwellings had been flat over this period,” said the RBA in May.