In light of the Reserve Bank’s decision to keep the official cash rate at the current level of 2.50 per cent, a senior economist with Australian Property Monitors (APM) has said interest rates will not be rising anytime soon.
“We still have an economy that’s in the neutral zone with no real sign of improvement or deterioration at the moment,” Dr Andrew Wilson told Real Estate Business.
“I think the Reserve Bank will sit on its hands for a while now and let these low interest rates work their way through the economy.”
Dr Wilson said the low interest rates together with strong momentum had produced a hotter than usual winter that would continue well into autumn next year.
“We’ve got absolutely higher confidence from buyers and sellers in most marketplaces,” he said.
“People who have perhaps put off their buying and selling decisions over the last couple of years are now becoming activated again, and we are seeing a lot of buyer and seller activity at the moment.”
Sydney has been the strongest performing capital city, having achieved record auction clearance rates over the past two months. Last weekend, the city achieved an auction clearance rate of 84 per cent, which was the highest result ever recorded.
Melbourne was also recording healthy figures, with auction clearance rates peaking into the high 70s after averaging around the 60 per cent mark for most of the year.
Dr Wilson said with spring being the strongest selling season of the year, there would be considerably higher numbers of listings in Sydney and Melbourne.
“We’ve actually seen a rise in listing numbers over winter for both Sydney and Melbourne for auction listings," he said.
However, according to Dr Wilson, the real test for the housing market’s continued strong performance is the economy.
“We’ve got forecasts of rising unemployment and declining growth over the next year in Australia,” he said.
“The recent government forecast was for 6.25 per cent unemployment next year. That would be the highest unemployment rate since 2002 and if we get that sort of shake-up in employment, that will have an impact on the housing market.
“We must be very careful and mindful of that impact over the short and medium term of a deteriorating economy on the housing market. That’s the reason interest rates have been falling this year, and that’s to try to stimulate the economy to offset any deterioration over the medium term.”