The Reserve Bank of Australia’s (RBA) monthly decision on interest rates was again in the spotlight this week with the RBA deciding to keep the nation’s official interest rate on hold at 3.5 per cent at its July board meeting. The move was in line with expectations following two straight months of rate cuts totalling 75 basis points.
The recent cuts appear to have had some impact with private sector figures reporting a rebound in house prices in almost every Australian capital city. RP Data-Rismark’s Home Value Index increased 1 per cent in June after falling 1.4 per cent the month before and still sitting 5.3 per cent down from the year before.
Breaking down the states; Hobart posted the biggest gains, with home values rising 2.7 per cent in June, followed by Canberra and Perth where home values rose 2 per cent. Sydney, Melbourne and Brisbane each saw housing values rise by 1 per cent last month while values in Darwin eased 0.7 per cent and Adelaide's housing prices dropped 1.1 per cent.
RP Data’s research director Tim Lawless attributed the monthly gain to the 55 basis point reduction in the average discounted home loan rate over May and June as well as the subtle improvement in consumer sentiment readings.
The most recent rate cuts have also been credited for a jump in building approvals. The Australian Bureau of Statistics reports building approvals jumped more than five times the amount expected. Approvals for new dwellings jumped 27.3 per cent in May after falling 7.6 per cent the month before. However analysts have warned the data series is volatile and that the latest numbers are from a low base and include mainly apartment approvals rather than housing.
The Housing Industry Association’s Senior Economist Andrew Harvey also pointed out the figures were aided by the “bring forward” effect in Victoria and New South Wales, where buyers rushed into the housing market to secure state government home buyer incentives before the end of the financial year on June 30, 2012.
Nevertheless while the longer term picture remains uncertain, home owners have breathed a sigh of relief in the short term amid expectations the Reserve Bank of Australia will still cut rates at least one more time this year.
