It was not surprising today when the RBA decided to keep the cash rate on HOLD at 2.50% at their monthly meeting.
Today’s interest rate decision will give more confidence to the already active residential market place. The RBA’s last rate action was in August when it lowered the cash rate by 25 basis points to 2.5%. Since then MMJ residential agents have reported strong buying activity.
This did not come as any great surprise with most economists predicted that a rate cut was unlikely given the present state of the economy, furthermore several economists are now predicting that the next interest rate move will be upwards.
Tim Lawless, RP Data national research director, said the RBA board would likely be looking at the positive signs in the national property market, which have a multiplier effect on the rest of the economy.
“More housing market activity has translated to greater developer confidence and a consistent upwards trend in new building approvals,” he said.
“RP Data’s February results showed flat capital city dwelling values that will probably reassure policy makers such as the RBA that the unsustainably high rate of capital gain that has been evident since June last year may be winding down.”
Mr Lawless said that as long as mortgage rates remain low, housing market conditions should stay in “positive growth territory”.
The coming 90 days will be particularly interesting with rate announcements – the Reserve Bank has grounds for a rate increase or if conditions improve it could seek to perhaps fight inflation by using more restrictive policy.