Rates need to remain low: expert

Rates need to remain low: expert

Posted on Tuesday, October 01 2013 at 2:44 PM

The Reserve Bank of Australia (RBA) has kept official interest rates on hold once again this month, in a move that one expert believes should be replicated for the foreseeable future.

At its regular meeting today, the RBA Board
decided to hold the cash rate steady at 2.5 per cent.

RP Data research director Tim Lawless says
many capital cities are in a property price recovery mode at present, but the low
mortgage rate environment is still not having an impact in some markets.

House values across Australia’s third
largest city, Brisbane, have barely moved over the past year, Lawless points

In addition, dwelling prices are lower over
2013 in both Adelaide and Hobart, while momentum has shrunk in both Perth and

In his view, historically low rates are
beginning to drive increased activity in the property sector, but it’s patchy
at best.

“These cities would certainly benefit from
mortgage rates remaining at their low setting,” he says.

The RBA began lowering the cash rate in
November 2011 and it currently sits at a 50-year low of 2.5 per cent.

Many economists now believe the current
cycle of reductions is nearing an end, although some forecasts don’t tip rates
will begin to rise again for some time.

Lawless says the housing market broadly is
responding to the intended stimulus, but it’s far from universal.

“Not only are (combined capital city) home
values up by 8.7 per cent since the recovery trend kicked off in June last
year, but there has also been a sharp improvement in the level of credit demand
for new housing.”

Activity in the country’s two largest
housing markets, Sydney and Melbourne, is largely boosting this result.

The housing construction sector is still
yet to see the full benefits of lower rates, he says, although new data
released today shows some signs of positivity. New home sales and dwelling
approval figures are trending upward.

“Based on (Australian
Bureau of Statistics) housing finance commitments data, the number of mortgage
commitments for new housing has risen by more than 50 per cent over the 12
months to July this year.”

flow through to new housing investment is one of the key desired outcomes from
the low cash rate setting.” 

Article source: http://feedproxy.google.com/~r/API_Property_News/~3/g9mbyZnF2p4/rates-need-to-remain-low-expert