Jessica Darnbrough and Steven Cross
The Reserve Bank of Australia has failed to surprise industry pundits, with the board opting to leave the cash rate on hold.
Earlier today, the RBA indicated that the current three per cent monetary policy setting was “appropriate” and therefore decided to leave the cash rate on hold in April.
According to RP Data’s Tim Lawless, on the whole the Australian economy and property market is fairing quite well – especially in comparison to the rest of the world.
“The latest housing market indices from RP Data and Rismark International, which showed another rise in dwelling values across the capital cities in March, would have provided further reassurance to the Reserve Bank that the previous rate cuts are taking affect,” Mr Lawless said.
“Based on RP Data's index to the end of March, capital city dwelling values have risen by 4.7 per cent since bottoming out in May last year, with every capital city housing market recording a rise in home values.
“Rents and investor yields are also rising, as are transaction volumes. Pretty much every market indicator is pointing to a further recovery in the housing market; clearance rates are higher, homes are selling faster and vendors are discounting their prices by less.
“The broad based recovery in housing market conditions, together with the strong labour market data for February, high consumer confidence and an improving share market, are all factors that are likely to keep interest rates at their current setting.”
Peter Bushby, president of the Real Estate Institute of Australia (REIA) believes rate cuts have not increased confidence in the market.
“While declining interest rates have been the major contributor to an improvement in housing affordability it appears that first home buyers need more than interest rate cuts to encourage them to enter the market.”
Mr Busby believes issues such as inefficient state taxes, excessive red tape and land-release delays urgently need to be addressed.
But Leanne Pilkington, general manager of Laing+Simmons doused fears that the next interest rate movement may be upward.
““Ever since interest rates began a downward movement in the cycle there has been speculation as to when they may begin rising again. Some economists are even suggesting the next movement may even be up,” Ms Pilkington said.
“But on the ground, the case for a near term increase in rates is unfounded. Retailers are still doing it tough and there is heavy discounting occurring across the retail sector.
“Some retailers are discounting winter stock before the winter selling season has even begun.
“In terms of positive sentiment among consumers, retail is the obvious barometer and from the perspective of most retailers, any supposed increase in sentiment is yet to flow through to sales.”