RBA decision seen as positive sign for the housing market

by Mackenzie McCarty06 Nov 2013

The RBA’s decision to hold the official cash rate at 2.5% following yesterday’s meeting came as little surprise to most economists – and most appear to be reading it as a positive sign.

One RP Data spokesperson says that, from a housing market perspective, the current rate setting is ‘clearly’ having the intended effect of encouraging more buyers into the market.

“Transaction numbers are close to 20% higher compared with a year ago and dwelling values across our combined capitals index have risen by 7.9% over the past twelve months.  The RBA has, on several occasions now, stated they are comfortable with the level of capital gains in the housing market; in fact the current rate of growth is well below the highs achieved over previous growth cycles and dwelling values across every capital city apart from Sydney remain below their previous peaks.”

The RBA’s statement following yesterday’s meeting claims easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values.

“The full effects of these decisions are still coming through and will be for a while yet. The pace of borrowing has remained relatively subdued overall to date, though recently there have been signs of increased demand for finance by households. There is also continuing evidence of a shift in savers' behaviour in response to declining returns on low-risk assets. Housing and equity markets have strengthened further, trends which should in time be supportive of investment.”

Mortgage Choice spokesperson, Jessica Danrbrough, says strong employment and inflation data were behind the decision and that the Australian economy continues to go from ‘strength to strength’, removing the need for further rate cuts this year.

“Last month, the unemployment rate fell 0.1% to 5.6%, while the Consumer Price Index increased by 1.2% over the September quarter, taking the annual inflation rate to 2.2% - within the Reserve Bank’s target range,” she says.

“Furthermore, the NAB Monthly Business Survey found business confidence strengthened considerably in September – hitting its highest level in three and a half years. This positive data shows the Australian economy is performing very well at the current time, so it was unsurprising to see the Reserve Bank leave the cash rate untouched at the historically low level of 2.5%.”