C&G on the RBA’s Interest Rate Announcement, March 2014
The Reserve Bank of Australia Board met on the 4th of March 2014 to determine a continued stasis in the cash rate at 2.5%. Governor Glenn Stevens made the announcement on Tuesday afternoon, marking the seventh consecutive month that the rate has been on hold. Stevens indicates we will continue to experience this “period of stability” for some time - C&G takes a look at what this means for the Australian property market.
Residential Property Manager reports that “Key housing market metrics produced by RP Data continue to indicate buyer demand remains strong across the housing market.” RP Data national research director Tim Lawless has made comments that both auction clearances and mortgage demand are at high. “As long as mortgage rates remain low we would expect housing market conditions to remain in positive growth territory, at least in trend terms.”
The building economy also remains strong, with “Australian Bureau of Statistics figures showing building approvals were up 6.8 per cent in January, seasonally adjusted,” as reported by Herald Sun Business. Also reported was the fact that the number of private home approvals for January was the highest in twelve years, rocketing a yearly increase to “a robust 34 per cent.” This is echoed in Stevens’ official release: “recent information suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction.”
There’s a clear opinion among leading experts that the cash rate is expected to remain at the 2.5% hold for what could likely be most of the year. Angie Zigomanis of BIS Shrapnel, mentions in the Property Observer “low cash rates improve the affordability of housing loans, which provides a trigger for price growth to occur.”
The RBA will be relying on the growth of the Australian property market to eventually provide a more balanced economy and as such a spark for a rise in interest rates. HSBC Australia chief economist Paul Bloxham affirms, saying “the timely indicators of activity, such as building approvals, retail sales, housing prices and the business surveys are helping to affirm the RBA's view that growth is rebalancing."
As ventured by Stevens, “Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low.”
Chisholm and Gamon look forward to assisting you take advantage of this continued stable period in the real estate market.