This month has been a busy one on the economic front with the release of the Federal Budget, the date set for the Federal Election and a cash rate cut by the RBA. In the last couple of weeks since these events I have noticed more investors in the market in comparison to the first quarter of this year. It seems they are keener than ever to secure a property as a result of record low interest rates and potentially with one eye on proposed changes to the negative gearing tax benefit.
Turning to the most recent economic information put out by the analysts and unsurprisingly there has been a large focus on the cash rate cut by the RBA and the federal election campaign. The minutes from the RBA’s monetary policy meeting have been interpreted as indicating the rate cut was a one off for the time being, but the general consensus of the analysts seems to be that it will be heading even lower this year. The key drivers for the rate cut are considered to be weak inflation and wage growth data indicating the economy is still struggling to get going, although consumer sentiment soared after the rate cut and federal budget were announced. It’ll be interesting to see how this plays out in the property market but early indications are positive with elevated auction clearance rates over the last couple of weeks.
Below is the key economic commentary that caught my eye that may be of interest to those looking at transacting property in the near future:
NEWS
RBA cash rate decision
‘‘At its meeting this month, the Board decided to lower the cash rate by 25 basis points to 1.75 per cent.
In reaching today’s decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate. At present, the potential risks of lower interest rates in this area are less than they were a year ago.’
Source: Reserve Bank of Australia
Auction results
Weekend auction results for Saturday 21 May 2016:
– Sydney: 78%
– Melbourne: 74%
– Brisbane: 58%
– Adelaide: 64%
Source: Domain.com.au
Wages growth
‘March data showing a new record low in wages growth suggests that another rate cut as early as June or July is possible… we remain of the view that the RBA will cut rates two more times this year taking the cash rate down to 1.25%. Our base case for the next move is August but it could come earlier.’
Source: AMP Capital
Consumer sentiment
‘Consumer sentiment surged by 8.5% in May to its highest level since January 2014. The May print picked up the consumer reaction to both the RBA’s rate cut and the 2016/17 Federal Budget. The Unemployment Expectations index fell by 5.8% and is now 7.5% lower than it was a year ago – job security fears have eased as the unemployment rate has trended lower.’
Source: National Australia Bank
Housing trends for the Eastern Suburbs:
Here are some recent sales reports for a selection of suburbs below:
If you would like a suburb report more specific to your property type or for a suburb not listed, please don’t hesitate to contact me.
This market update contains general information only as of 27 May 2016. Before making any decision or taking any action that may affect your finances, you should consult a qualified professional adviser. Kiki Bermudez or Mint360property shall not be responsible for any loss whatsoever sustained by any person who relies on this market snapshot. To unsubscribeclick here
