Market News: Rate Cut Reinforces Buyer Confidence

While the Reserve Bank's decision to cut the official cash rate by a further 25 basis points in early August had been widely expected, the rush by lenders to pass on the cut in full to consumers within minutes was received by the markets with some surprise. The banks' speedy reaction was in stark contrast to earlier rate cuts, where lenders delayed decisions for days or even weeks, often cutting their rates by less than the RBA while citing increased costs of borrowing. The official cash rate is now at its lowest level since 1959 and consumer loan rates are at GFC levels.


Property researchers continue to vary in their market reports, although all agree Melbourne prices are trending upwards on the back of rising confidence spurred by low interest rates. The latest RP Data/Rismark Hedonic House Price Index indicated Melbourne property prices grew by 2.3% in July, taking the year-to-date growth to 4.6%. Meanwhile, according to the Australian Bureau of Statistics (ABS), Melbourne prices grew by 3.3% in the 2012/2013 financial but surged by 2.4% in the June quarter. APM has reported Melbourne house prices are now approaching their previous peak.


But RP Data analyst Tim Lawless told Fairfax this latest rate cut comes with risks for the property market, with economists warning the RBA's attempts to keep the wider economy afloat may overcook an already hot housing market.


SQM Research has released its July Stock on Market Report, which showed the number of properties for sale has fallen in every capital city except Melbourne and Canberra. According to the data, Melbourne now has one of the highest levels of stock of any capital city and is one of the only areas in which the number of properties for sale is higher than the same period last year, climbing by 2.8%. CEO Louis Christopher said despite high Melbourne auction clearance rates, the high number of properties for sale is creating headwinds for a housing recovery.


With just a short few weeks until the spring selling season brings an influx of new stock to the market, the current environment offers both vendors and buyers some good opportunities to transact before conditions change once again.

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