Nell Matzen - 5 Oct, 2021

The RBA will not be raising the cash rate until 2024, despite growth in property prices

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During October’s Reserve Bank of Australia (RBA) monetary policy meeting, it was announced that the RBA remains steadfast to their cash rate promises, with no plans on lifting the 0.1% rate until 2024. 

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RBA Governor Philip Lowe acknowledged that lifting the cash rate would lead to better housing affordability but would also mean poor wage growth and fewer jobs. 

Instead, Dr Lowe said that tackling housing affordability had to be done at a government policy level.

“The way to address these concerns is through the structural factors that influence the value of the land upon which our dwellings are built.”

“The factors include the design of our taxation and social security systems; planning and zoning restrictions; the type of dwellings that are built; and the nature of our transportation networks.”

“These are all obviously areas outside the domain of monetary policy and the central bank,” he said. 

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Lenders also keeping interest rates low for home loans

A record number of mortgage holders are still taking advantage of low-interest rates and refinancing their loans

In order to entice customers looking to refinance, banks and lenders are implementing competitive variable rates.

Research Director at Sally Tindall said, “with record numbers of homeowners now locked into fixed-rate mortgages, lenders are shifting their sights to variable rates.”

However, figures from the Australian Bureau of Statistics (ABS) show that although refinancing figures remain high, first home buyer loans are dropping thanks to investors returning to the market and housing prices continuing to rise. 

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How lockdowns have affected the property market

Property prices continue to grow in the face of the lockdowns occurring all over the nation.

Sydney and Melbourne have continued to see consistent growth in the housing market, despite spending the longest time in lockdown throughout 2021. 

Even with auctions and open houses being disrupted, data from the ABS has revealed that the average house price has risen to $835,700, roughly $50,000 from the last quarter.

The data also showed Sydney prices rose 8.1% in the June quarter, and Melbourne saw an increase of 6.1% in the same period. 

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The biggest issue arising from the lockdowns has been dwindling auction clearance rates and buyers and sellers withdrawing from the market.

In Melbourne, during August, the auction clearance rate dropped 17.3%.

Domain Chief of Economic Research Nicole Powell said the lack of physical property inspections considerably impacted the market.

“Not being able to physically inspect a property has had a dramatic impact on the market – not many people buy a home sight-unseen,” she said. 

Forecast for the property market once lockdowns lift

Housing markets are beginning to heat up along with the spring weather.

Experts predict a busy spring/summer selling period thanks to pent up buying and selling activity dampened by the lockdowns. 

Head of Research at CoreLogic Tim Lawless said that the lifting of lockdowns would be a welcome relief to buyers, sellers and estate agents, taking some pressure off the market by offering more choice. 

“With lockdown restrictions planned to ease further as vaccination targets are met, we should see an increase in confidence from vendors thinking of selling their property,” he said.

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According to data from CoreLogic, Melbourne has experienced the most significant increase in property listings, seeing a rise of 48.5%.

Although not as strong, Sydney’s property market is also starting to come back to life with the announcement of the roadmap out of lockdown, coupled with high vaccination rates.

The latest data showed a 31% increase in listings; however, this is 3.8% lower than the five-year average. 

Words by Nell Matzen


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