RBA Decision: Property industry responses

Despite the rate remaining unchanged yesterday, opinions abound across the property industry. Here are comments from leading property industry experts that emerged yesterday.

REIA president Peter Bushby

In recent years, lower borrowing costs have been a major driver of improving housing affordability and have helped many Australians with their mortgages.

As a result of the easing monetary policy, housing affordability in Australia has been improving slightly for the past two years and the proportion of income required to meet home loan repayments is at its lowest since the June quarter of 2003.

Housing affordability is a real issue for Australians and first home buyers need an incoming Government to address this through a comprehensive housing policy.

Keeping interest rates low is essential not only for encouraging first home buyers into the market but it’s vital to further stimulate building activity and provide new jobs in the  housing industry.

ANZ Research head of Australian economics Ivan Colhoun

Today’s Monetary Policy Decision text by the RBA was almost identical to that released following the August easing of monetary policy.

By reverting to the somewhat standard “The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target”, the Bank is likely signalling no near-term move in rates is being considered (the absence of phrases such as “scope to ease” and “policy is appropriate for the time being” are also indicative of this less active easing consideration).

One of the main discussion points about today’s statement seems to be the absence of reference to scope for easing. We do not read this as suggesting there is no scope for further easing or that the Bank has shifted to a neutral bias. To us the Bank was signalling that it was on active easing watch prior to August’s move, but this active consideration expired after the August move. The phrase was not restated after the August move or in the August minutes. However, with growth set to remain below trend for the next year or so, inflation contained, and unemployment gradually rising, there remains scope for further monetary easing if required. The August minutes reinforce this assessment as the Bank remarked it did not want to encourage thoughts of imminent further easing, nor did it want to suggest that rates could not be reduced further. Its conclusion in the minutes was that the Board would study incoming data in the months ahead to see if policy remains appropriately calibrated. Further information on the Board’s thinking may well be forthcoming in the September Board Minutes, if the August Minutes are anything to go by.

The Bank again noted that the AUD remained at a high level and that it may fall further, something that would be helpful in facilitating the transition of growth from mining-investment led growth to broader growth in other sectors of the economy.

Today’s statement reduces the chance of a further cut in the cash rate as early as the October Board meeting. The November meeting is therefore the likely earliest time period for a further move (after the next CPI release). While we suspect the Bank would prefer not to reduce interest rates any further in this cycle as lending rates and real cash rates are now at stimulatory levels, there remain a number of pressures to the downside given growth is forecast to be below trend for an extended period and unemployment is rising. This continues to reinforce our view that any early rise in Australian cash rates remains very unlikely. The course of the AUD is also an important consideration in the setting of policy at the present time.

RP Data research director Tim Lawless

The hold on interest rates today comes as no surprise despite the low private sector inflation reading that was released yesterday.  The latest data associated with the housing market remains positive, providing an increasingly firm indication that households and developers are responding to the low interest rate environment.  Dwelling values have continued along their recovery path, with home values half a percent higher over in August and 7% higher since the housing market started recovering in May last year.  The 0.5% rise in dwelling values in August is likely to provide the RBA with some comfort after values rose by a cumulative 3.5% over June and July.   Importantly the rise in dwelling values has been accompanied by a substantial rise in buyer numbers as well.  Based on transaction data for the June quarter, the number of home sales across the capital cities is about 31 percent higher than a year ago.  Data on dwelling approvals yesterday also painted a stronger view of the housing market, with approvals 28% higher over the year.  All housing market indicators are pointing to an ongoing recovery and a strong spring selling season.   Mortgage rates remaining low together with buyer activity substantially higher and listings numbers about 15% lower than a year ago we are seeing the typical capital city home selling in just 41 days compared with 62 days a year ago and clearance rates remaining above the 70% mark week on week.

Finder.com.au spokesperson Michelle Hutchison

Borrowers and prospective first home buyers don't have to rely on the Reserve Bank for a rate cut this mortgage season because several lenders have started the season with special offers. In fact, eight lenders - including major banks - are offering special deals such as waived fees or discounted rates. It's a great idea to compare deals, use comparison sites like Finder.com.au and take advantage of the offers available. But make sure you do your research because a discounted rate or waived fee might not be worth paying more over the long term.

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