Tim Lawless comments on today's RBA cash rate decision
After two rate cuts earlier in the year, the Reserve Bank’s decision to hold the cash rate at their historically low level of 1.5% came as no surprise. Housing market conditions were almost certainly one of the topics discussed at the board meeting, as well as the stubbornly high Australian dollar, an inflation rate that is well below the target range of 2-3% and a remarkably strong rate of GDP growth released for the June quarter. From a housing market perspective, the commentary theme from the RBA has been one of slowing conditions, which has broadly been confirmed by the CoreLogic Hedonic Index which has shown the annual trend rate of growth across the combined capital cities is now well below double digits at 7.1% over the year ending September 2016. A year ago capital city dwelling values were rising by 11% per annum. Importantly, while growth conditions in the housing market have slowed, Sydney and Melbourne continue to record strong capital gains, albeit substantially lower than a year ago. Sydney dwelling values were up 3.5% over the September quarter and the Melbourne values were stronger at 5.0% growth over the quarter. Higher housing supply levels and lower levels of affordability are likely to naturally dampen some of the upwards pressure in housing markets, however investor activity has once again been consistently rising since June and some of the smaller capital city housing markets like Hobart and Canberra have been showing signs of accelerating. Clearly, the housing market is diverse and low interest rates are only one factor that is influencing conditions. The RBA is likely to be monitoring the housing market closely, looking for any signs of accelerating capital gains in the larger markets, or a ramp up in speculative investment activity.
Read the official RBA media release here.