C&G’s Guide to the July RBA Cash Rate Announcement

On Tuesday 3 July, the RBA left the national cash rate on hold for the twentieth consecutive meeting. In today’s blog, C&G take a look at what this means for the real estate market and its impact on the wider economy.

For the past 22 months and 22 associated meetings (accounting for the omission of the January meeting annually), the Reserve Bank of Australia has held the national cash rate steady at 1.5%. Governor Philip Lowe announced in his latest statement that soft consumer spending and high household debt were the main drivers of cash rate stasis, noting that these issues were a source of uncertainty impacting upon the economy as a whole.

 

Tightening credit, low wage growth and sluggish inflation appear to have contributed to the widely-anticipated rate hold, with experts indicating that something will have to give before an increase in the cash rate can occur. Low wage growth itself is contributing to weak consumer spending, along with the anticipation of rising interest rates in the future.

 

Softening house prices in some markets across Melbourne and Sydney have not gone unnoticed by the board, either. A tighter lending environment has had a knock-on effect upon construction, and building approvals are declining in some areas. Dr Lowe balanced the impact of rising mortgage interest rates by noting that average mortgage interest rates have been declining for some time.

 

Global uncertainty remained on the board’s radar this month, too, with Dr Lowe mentioning ‘strains in emerging markets’ and an ‘uncertain direction of international trade policies in the US’.

 

Looking to the Bayside real estate market more closely, there is no one-size-fits-every-property response to the cash rate stasis and Australian economy. We are seeing consistently strong results across Bayside for a variety of property categories, for which buyer demand remains robust. Clearance rates may be down on this time last year, but we’re seeing homes achieve outstanding results weekend after weekend. Thinking about selling or buying property? Reach out to your local Chisholm & Gamon office for information suited to your specific sale or purchase.