Market Update – RBA Cuts Interest Rates

By Katie Gibson

Rates were cut this week by Australia’s central banking authority. The decision could see discussions among regulating bodies accelerate around the introduction of stronger macro-prudential measures in a bid to slow down the Sydney property market.

The Sydney powerhouse is now well-known. What is not well publicised is the relative shortage of new listings in our markets suggesting potential sellers are still hopeful of more price gain before committing to sell.

While the RBA is said to be concerned about the effect of another cut on house prices in Sydney in particular, it is apparently prepared to rely on the Australian Prudential Regulation Authority (APRA) to ensure banks do not cut their lending standards in order to ‘drum up more business’.

Meanwhile, the Australian Financial Review (AFR) reported around $20 billion was wiped off the value of the big four banks by investors this week, due to expectations that APRA will act more swiftly than expected to deal with the threat of “rampant property speculation”.

A News Corp article revealed Sydney property prices are growing at twice the pace of any other capital city, despite two years of boom. The latest CoreLogic RP Data Home Value Index shows Sydney prices have grown by 5.4% over the three months to April, with Darwin a distant second at 2.1%. Adelaide prices were up by 1.9%, Canberra 1.7% and Melbourne 1.6%, with Perth prices the worst performing falling by 1.6%. Over the year, Sydney growth is pulling further away at 14.5%, with the next closest cities Melbourne at 6.9% and Brisbane at 2.2%.

Domain has reported Sydney’s median price is now over $900,000 and could reach $1million by the end of the year. Initial clearance rates for last weekend show a Sydney sale rate of 89.1% on a large volume of 699 properties. Dr Andrew Wilson is predicting a $2 million median by 2020 and a $3 million median by 2038.

The latest finalised auction results from RP Data revealed a clearance rate of 89.7% in Sydney, 87% in Melbourne, 59% in Adelaide and 62% in Brisbane. Volumes in other capital cities were too low to yield meaningful averages.

With future conditions as difficult to predict as ever, we encourage you to carefully review all activity around your property this week in light of the current environment.

As always, if we can be of any assistance to you, please contact our office.

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