The property market’s unheralded recovery leads the nation’s central bank to hold interest rates steady at 0.1 percent
The Reserve Bank of Australia (RBA) has decided to keep the nation’s official cash rate to remain on hold at 0.10 percent, a historic low level, reported 9news.
The decision to hold rates is a result of the property market’s continuous expected recovery, with certain regions experiencing rapid house price increase, the fastest rate in 33 years.
Many Australians see this period as the most opportune time to enter the market due to access to cheap credit, a delay in housing stock, and the cash-hoarding nature of a year in and out of lockdown.
RBA Governor Philip Lowe, said, “Housing markets have continued to strengthen, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, including first-home buyers.”
“There has also been increased borrowing by investors,” he added. “Given the environment of rising housing prices and low interest rates, the Bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
The RBA’s targets to raise interest rates are still years away, said Shane Oliver, chief economist at AMP Capital.
“The RBA is still a long way from meeting its conditions for a rate hike – namely inflation sustainably back in the two to three percent target range which will require full employment and wage growth sustainably above three percent,” Oliver said. “And the latest coronavirus outbreaks and lockdowns risk delaying progress towards its goals.”
Moreover, Sydney’s current lockdown will likely cause house price growth to slow in the coming weeks. This will be advantageous towards first-time buyers, who for the last few months saw the entry point of the market accelerated away.
RBA data shows that a total of AUD97 billion (USD70 billion) was borrowed to fund house buying in the first five months of 2021.
The Property Report editors wrote this article. For more information, email: [email protected].
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