RBA says property rebound will be short-lived

Property Investor

The RBA has defended its interest rate cut from last month saying the property rebound garnered from it won’t last long.

The Reserve Bank came under fire from some for reigniting the property market with its interest rate cut to another record low of 1.75 per cent.

Countering the criticism, the RBA says the high numbers of new apartments on the market in Melbourne and Sydney in particular, makes fears of a property bubble unwarranted.

To give you an idea of the numbers, around 44,784 new apartments are due for completion at the end of the year in Melbourne, Sydney and Brisbane.

That’s up from 36,486 the previous year, and they will rise again to 52,920 next year.

National residential listings fell in May in each capital city and in conjunction with increased demand from the month’s RBA rate cut it seems to have given vendors more confidence to lift their sale prices.

SQM Research managing director Louis Christopher explained this to Australian Financial Review.

“It’s possible the interest rate cut at the beginning of the month may have already led to an increase in buyer confidence, leading to higher absorption rates for listed properties,” he said.

“Certainly, it seems that vendors were a little more confident during the month with vendor asking prices rising across most cities.”

Bill Evans from Westpac says the comments from RBA governor Glenn Stevens recognise the fact that the rate cut stimulated the housing market and also indicate the RBA is not done yet cutting interest rates.

“It points out a number of reasons why this recovery is unlikely to be sustained, mainly around tighter lending guidelines, both voluntary and due to regulation, and expected increases in supply,” he told Australian Financial Review.

“This observation is important because it appears to allay any concerns that a further easing might over-stimulate the housing market.”


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