“Gradual” improvement in housing conditions as dwelling prices rise: RBA July minutes

Conditions in the housing sector “continued to improve gradually” with house prices rising in the June quarter, according to the minutes of the RBA's July monetary policy meeting, where the cash rate was left unchanged at 2.75%.

The RBA notes that the effects of lower interest rates "were most evident in the housing market and were expected to be apparent in further growth in dwelling investment".

Once again, the minutes provide room for the RBA to cut rates further if required, though the July minutes do note that the inflation outlook is “slightly higher because of the exchange rate depreciation”.

While the July minutes highlight rising dwelling prices (compared with them being deemed flat in the June minutes), they also note that “dwelling investment was flat in the March quarter with continued growth in investment in new dwellings “offset by lower spending on alterations and additions”.

The outlook though for new residential construction remains positive.

“Forward-looking indicators for new construction continued to be favourable, with the number of building approvals increasing strongly in April and loan approvals rising noticeably over recent months, including for new dwellings,” notes the RBA.

“Dwelling prices increased over the June quarter and auction clearance rates remained high by historical standards. This was consistent with the Bank's liaison with builders, which suggested that housing conditions had improved further in most states.”

The July minutes continue more or less where the June minutes left off in relation to the housing market.

In June, the RBA provided an overall positive assessment of trends in the property market noting that “effects of low interest rates had been evident in a range of housing market indicators”.

The effects of lower rates were still apparent "across a range of indicators and, given the lags involved in the transmission of monetary policy, this process had further to run" says the RBA in its July minutes