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RBA avoids adding further competition to marketplace

RBA avoids adding further competition to marketplace

By Sarah Lefebvre on Mar 07 2017


Buyers finding it difficult to break into Sydney and Melbourne’s property markets were spared further competition today with the Reserve Bank of Australia holding the official cash rate steady at 1.5% at its monthly meeting.

Buyers finding it difficult to break into Sydney and Melbourne’s property markets were spared further competition today with the Reserve Bank of Australia holding the official cash rate steady at 1.5% at its monthly meeting.

A cut to the official cash rate would have created a new record low in monetary policy, further fanning interest from buyers and investors and worsening affordability issues in Sydney and - to a lesser extent - Melbourne.

The latest data from CoreLogic showed capital city property values rose by 11.7% in the 12 months to the end of February 2017. The New South Wales and Victorian capital cities continued to post strong price growth over the past three months (4.5% and 5.5% respectively).

LJ Hooker's Head of Research Mathew Tiller said listings volumes in both cities remained very tight, ensuring price growth will be maintained in the short term, especially combined with pent-up buyer demand.  

Mr Tiller said recently released economic data confirmed the decision for the RBA’s Board members.

"The strongest economic news over the past week was that Gross Domestic Product rebounded strongly in the last quarter of 2016, which was an encouraging turnaround from the September quarter contraction," said Mr Tiller.

"The quarterly rise of 1.1% took annual GDP growth to 2.4% which was above market expectations."

Mr Tiller said the most likely outlook was for a continuation of the official cash rate at current levels throughout 2017.

"The various economies around Australia are operating at differing levels, which will encourage the RBA to maintain a steady path," said Mr Tiller. 

"Looking forward the most likely outlook for the cash rate in 2017 is that the RBA will keep any adjustments to a minimum.

"That being said, mortgage holders, buyers and investors should accept that their own banks will move independent of the RBA."

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