The Reserve Bank of Australia (RBA) announced on Tuesday that it is keeping the official cash rate on hold at 1.5% for the 28th consecutive month, marking the longest period ever for rates to remain static.
CoreLogic Head of Research Tim Lawless said that the decision is unsurprising given the diversity of economic conditions. Labour markets are improving, but wages growth has been slowing down and inflation has weakened.
Lawless said it was difficult to measure RBA’s sentiment on the current housing market, considering the fact that the central bank continues to call out the cooling conditions in Sydney and Melbourne.
According to the CoreLogic data to the end of November, the Sydney market has already posted a 9.5% drop in values since peaking in July 2017. It will likely eventually surpass the previous record peak-to-trough decrease of 9.6%, which was recorded during the last recession between 1989 and 1991.
Despite such weakness, dwelling values in Sydney remain 41% higher than they were five years ago. Melbourne values, meanwhile, remain 38% higher. Both of these largest cities in the country showed five-year growth rates well in excess of most other capital city markets.
Nevertheless, five of the eight capital cities have registered a capital gain over the year to date. From a macro view, though, they have much less of a weight on the national figures than Sydney and Melbourne do.
In a separate survey conducted by HashChing, almost half (48%) of brokers agreed with Morgan Stanley’s forecast that national house prices could decrease by up to 15% in 2019.
It is important to note, however, that to- date, it has not been observed that the housing downturn is affecting household consumption or saving. Regardless, this is likely to be a key factor that the RBA will be monitoring.
RBA last cut the cash rate to its record low of 1.5% in August 2016, but 41% of HashChing’s respondents believe that the cash rate will increase in 2019.
HashChing COO Siobhan Hayden sees a positive outlook for buyers, saying that the present is the ideal time to get a new home loan.
“The Christmas and New Year period is an expensive time of year and one that forces many of us to consider our current financial position. The great thing is that it’s also a highly competitive season in the market – making it the perfect time to hunt around for a new home loan, or even help a loved one find the best rate on theirs,” she said. “It’s fantastic to see an uptick in borrowers actively taking charge of their financial position and getting ahead of likely interest rate rises in 2019.”