The Reserve Bank of Australia (RBA) recently announced that the cash rate will stay at 0.10% for an eleventh month in a row, despite continued rapid rises in house prices. It also announced that it will maintain its quantitative easing program. These historically low cash rates have held strong for a significant amount of time, but what does that mean for individuals and businesses investing in the housing market? What changes should we expect to see in the coming months? Read on to learn more.
Despite the recent growth in market listings and the development of new dwellings, Australia is still experiencing an increase in monthly house prices by 1.5% per month. However, that is down from a peak growth of 2.8% in March of this year. Although the RBA announced that it will maintain these figures for now, the only constant in the housing market is change.
As house prices continue to increase, measures may be taken to tighten lending standards as banks start running the risk of their lenders being unable to repay loans. Furthermore, as international border restrictions ease we will likely see a surge in housing prices as international buyers and expats are able to return to Australia.
It is more likely that we will see these kinds of measures come into effect before the interest rate changes with predictions estimating that the Australian housing market will be strong coming out of the COVID-19 pandemic. The RBA is likely to wait until the dust settles before making any major changes to the current cash rate.
Disruption caused by the pandemic means there has been less spending on travel and more on debt repayments. Additionally, our national arrears and defaults are particularly low. Overall, this has put Australia in a strong economic position. It is unlikely that the RBA will lift interest rates too soon, having strongly indicated that they would remain unchanged until 2024.
Overall, it is a promising time for housing property investment in Australia. This is particularly true for owner-occupants and those who have used the pandemic to put more thought into debt management, freeing up opportunities for growth and investment.
However, the market is always subject to change and it is important to keep up to date on anything that can affect your position. Let us know if you have any questions about how you can make the most of the current cash rate.