eChoice RBA Commentary for September 2017.
The official cash rate stays at 1.5% as:
Underlying inflation is running just below 2%;
Australian dollar appreciated, partly reflecting a lower US dollar;
Wage growth continues to stagnate; and
Property prices in some sectors rose, while others declined.
Leaving rates on hold for the 12th consecutive month, the Reserve Bank of Australia (RBA) says the economy is improving. However, while inflation has risen along with the Australian dollar value, wage growth continues to stagnate. Also, the property market continues to fluctuate with some markets falling in value, as others rise. Therefore, these aspects are encouraging the RBA to hold rates until greater signs of stability emerge.
Over the last month, the RBA’s stance on monetary policy remains relatively unchanged. With volatility low in financial markets and growth increasing internationally, the RBA still have a ‘wait and see’ outlook. Consequently, the RBA said the low official cash rate is continuing to support the Australian economy.
The Reserve predicts inflation will rise and stay around 3% over the next three years. Mining and business conditions continue to improve, and residential construction is forecast to remain high for years too come. The housing market, as a whole, continues to remain variable.
The latest CoreLogic data suggests the Sydney housing market is slowing, after record rates of increase. Hobart, on the other hand, emerged as the best performing capital over the last 12-months.
Nationally, dwelling values flatlined, with capital city values rising just 0.1% over the month. Regional dwelling values dropped by 0.2%. This data, say economists, suggests the housing market has moved through its peak growth phase.
|Monthly Capital City Home Values at 31th August 2017|
|City||% Change Month-on-month||% Change Year-on-year||% Change Month-on-month||% Change Year-on-year||% Change Month-on-month||% Change Year-on-year|
Source: CoreLogic RPData
The slowdown in dwelling values is most noticeable in Sydney, where housing values experienced record growth. Since dwelling values began rising in 2012, Sydney property prices have risen by 75%. As a result, this equates to a Sydney median dollar value gain of $521,000.
|Capital City Home Values at 31st September 2017|
|City||% Change Month||% Change Quarter||% Change Year||Total Gross Returns||Median Dwelling Values|
Source: CoreLogic RPData
The Sydney Market
The quarterly growth for Sydney peaked in October 2016 when dwelling values jumped 6.3%. Since then, the quarter rate of Sydney dwellings has consistently fallen to reach the current rate of 0.3%.
The Melbourne Market
The Melbourne market, in comparison to Sydney, is more resilient. Auction clearance rates in Melbourne are consistently over 70%. Plus, inventory levels stay high. Melbourne’s quarterly growth rate peaked at 4.4% in November 2016. Although, this capital still has a quarterly growth rate of 1.9%.
The Hobart Market
Hobart’s market is continuing to gather momentum. The annual pace of gain in this capital is 13.6%, the highest of any capital. Hobart’s growth rate hasn’t been this high since 2004.