Cash rate to stay on hold

Bendigo Weekly | Bendigo Weekly | 07-Sep-2017


EXPERTS predict the official cash rate will remain steady for the duration of 2017 in the face of muted inflationary pressures and mixed demand conditions.

Housing Industry Association principal economist Tim Reardon said this week’s statement from the Reserve Bank and other recent housing indicators suggest that interest rates do not need to increase anytime soon. 

Comments issued by the Reserve Bank governor on Tuesday confirmed the indicators in the housing market vary considerable around the country. 

This is demonstrated in recent housing price indicators and building activity that show some regions remain strong while others have cooled. 

“Residential building activity is now starting to contract having been a key driver of growth up until recently. New dwelling commencements peaked in the March 2016 quarter and remain relatively high,” Mr Reardon said.

“The RBA correctly notes that investors in residential property are facing higher interest rates. 

“There are also additional restrictions on foreign investors which could have a negative impact on the building industry. 

“These factors are impacting the industry at a time when it is has commenced a downward cycle.

Mortgage delinquency in Australia remains very low, but growth in housing debt has been outpacing growth in household incomes. 

“For these reasons, Australia’s economy will continue to require low interest rates in order to achieve stronger growth over the medium term.”

The June quarter edition of the Adelaide Bank/Real Estate Institute of Australia Housing Affordability Report shows a decline in housing affordability nationally with the proportion of median family income required to meet average loan repayments increasing by 1.0 percentage points to 31.4 per cent. 

This was an increase of 0.2 percentage points compared to the corresponding quarter in 2016. The number of first home buyers increased by 14 per cent during the quarter or 1.0 per cent year on year and there was some relief for renters also apparent over the quarter. 

Head of business development at Adelaide Bank, Darren Kasehagen, said a slight increase in housing affordability shouldn’t overshadow the welcome news that the number of first home buyers increased by 14 per cent during the quarter. 

Compared to the corresponding quarter in 2016, the number of first home buyers went up in Victoria, Queensland, Western Australia, Australian Capital Territory and the Northern Territory, with both territories recording very solid FHB growth of 49.6 per cent and 40 per cent respectively. 

“The average loan size to first home buyers increased by 1.2 per cent over the June quarter and 0.6 per cent over 12 months to $365,600 with the average loan size to first home buyers decreasing in South Australia, Tasmania and the Australian Capital Territory over the quarter. Year on year, the average loan size to first home buyers increased in New South Wales, Victoria, Queensland and the Northern Territory,” Mr Kasehagen said.

“Over the quarter, the proportion of median family income required to meet rental payments reduced by 0.6 percentage points to 24.3 per cent. This improvement was recorded across all states and territories except in the Australian Capital Territory which was stable. In fact, it costs less on average to meet mortgage payments in Tasmania and the Northern Territory than it does to rent.” 

Of the total number of Australian first home buyers that purchased during the June quarter, 6,648 were from Victoria. The number of loans to first home buyers in Victoria increased by 10 per cent.

In Victoria, first home buyers now make up 21.1 per cent of the state’s owner-occupier market. Rental affordability improved for the quarter with a decrease of 0.7 per cent of income required to meet median rents.


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