RBA believes market will respond to election
The uncertain federal election result and the impact of Brexit will be monitored closely by the Reserve Bank of Australia in the new Financial Year, according to real estate group LJ Hooker.
The RBA postponed further market stimulus at its July board meeting today, choosing instead to hold steady until it is known whether the federal election results in a hung parliament or which of the two major political parties can form a government.
But a cash rate cut could still come by the traditionally busy spring selling season if market conditions did not resume promptly, LJ Hooker’s CEO Grant Harrod said.
“Sellers can be put off by elections and we’ve just come out of one of the longest campaigns held in Australia,” said Mr Harrod.
“During the recent campaign, listings across the board were down an average of five per cent across the country compared to the same period last year.
“But history has shown listings rebound after a poll and the RBA, through holding the cash rate at the record low of 1.75 per cent today, is waiting for this to happen.
“Buyer enquiry has remained strong throughout the election campaign while the average capital city auction rate hit as high as 72 per cent over the period. There’s a strong opportunity for sellers to capitalise on that interest now and beat their competitors ahead of the traditional spring listing period.”
But Mr Harrod warned sellers still needed to meet buyer expectations.
“Buyers are motivated by record low interest rates, but they’re also very aware that the rate of price growth in many locations has slowed. Sellers need to meet the market, or else they could face an extended period on the market.
“Conditions are great at the moment for those looking to upgrade.”
While real estate does not have the liquidity of stocks, Mr Harrod said the RBA would still keep an eye on any property ramifications of the Brexit outcome.
“We don’t anticipate any impacts to filter through to the actual property market in the immediate future due to the time it takes to transact. But it may turn out that we benefit from the global conditions as investors seek out alternatives to London.”
Mr Harrod said the RBA would closely watch inflation, which is currently running at 1.3 per cent, below the RBA’s preferred target of two to three per cent.