Sydney stymies interest rate cut
The startling growth in the Sydney property market, almost forty per cent over the past three years, and boom time auction clearance rates of over 80 per cent so far this year could be behind the RBA decision to leave interest rates on hold at its April meeting. The disconnection between house prices in Sydney and other capital city markets is still galloping on despite the efforts of regulators to dampen speculative interest and tighten lending practices. Just last month, Reserve Bank Governor Glenn Stevens highlighted the RBA’s inability to bring house prices down due to the lack of supply in the marketplace.
Property boom spooks RBA
So when the RBA left the cash rate on hold this month at 2.25 per cent the Sydney property market featured in the decision process. The statement noted that ‘Dwelling prices continue to rise strongly in Sydney … The Bank is working with other regulators to assess and contain risks that may arise from the housing market’. This leaves the way open for the RBA to perhaps set more stringent bank restrictions on investor loans.
The Housing Industry Association was critical of the decision to leave rates on hold. The voice of the housing industry urged the need for successive interest rate cuts to ‘bolster the strength in new home building and assist in generating momentum elsewhere in the economy’.
FNN spoke to HIA Chief Economist Harley Dale about the RBA decision to leave rates on hold.
‘I think the Reserve Bank has made it clear that it intends to cut the interest rates further. That being the case it should really just get on and do it and then we have that uncertainty out of the way as to when further interest rate cuts will occur because they have already happened. That lays the platform then for a hopefully mature debate and discussion at a political level through the rest of 2015 as to the economic reform path that we need to embark upon to complement the low interest rate environment that we already have.’
Australian auction results
Looking at this week’s Easter weekend auction results across Australian capital cities - Sydney recorded a 68 per cent clearance rate from 34 properties for auction, In Melbourne, just 13 properties went to auction with 7 reported sold, too little for an official percentage to be declared. Brisbane was the same with 9 listed auctions and 4 reported sales whilst Adelaide had no official sales reported.
Commercial property sector
iProperty Group Limited (ASX:IPP)
has reported record collections of $7.5 million and says it has an excellent growth trajectory for the remainder of the year.
Abacus Property Group (ASX:ABP)
says it will sell the Aspley Village Shopping Centre in Queensland to an unnamed buyer for $32.25 million.
360 Capital Industrial Fund (ASX:TIX)
has extended its offer for all the units in Australian Industrial Real Estate Investment Trust by 6 weeks.
And the proposed merger between Novion and Federation Centres (ASX:FDC)
may have hit a road block with the ACCC extending its review of the deal.