In line with expectations,
the RBA has held the cash rate at a record low of 0.1 of a percentage point.
it's meeting today, the board decided to maintain the targets of 10basis
points for the cash rate and the yield on the 3-year Australian Government
bond, as well as the parameters of the Term Funding Facility," the RBA
The board confirmed it will not be increasing the
cash rate until 2024 at the earliest.
"The board will not increase the cash rate until
actual inflation is sustainably within the 2to 3percent
target range. For this to occur, wages growth will have to be materially higher
than it is currently. This will require significant gains in employment and a
return to a tight labour market.
"The board does not expect these conditions to
be met until 2024 at the earliest."
According to analysts, the
record-low interest rate will send property prices soaring.
Shane Oliver, chief economist at AMP Capital, expectsthis decision will leave mortgage rates at
record lows, which, along with government home buyer incentives and economic
recovery will continue to push average property prices higher.
"Headline inflation will rise
due to base effects as the collapse in petrol prices and childcare costs drops
out of annual comparisons, but underlying inflation will remain low at around 1.5
percent or less out to next year.
"This, in turn, will see the
RBA leave rates at 0.1 percent probably out to end 2022 at least,” Mr. Oliver
document released by the RBA last month, following a Freedom of Information
request, the bank predicted that a permanent 1 percentage point (100 basis
point reduction) cut in the official rate could increase real housing prices by
30 percent over three years.
With the RBA clearly alert to
the risks from low-interest rates, property experts believe the bank’s
predictions are fairly accurate.
"With what we can see today
based on recent shifts in inventory levels, we would be comfortable in saying
the RBA forecast will apply in 75 percent of regions,” self-proclaimed data
nerdsArjunPaliwal and Kent Lardnertold Smart Property
According to their analysis
of inventory level trends over the last two years, a substantial decline in
stock levels is evident, creating high price pressure.
"There has been a dramatic
decline in stock levels relevant to sales volumes (inventory levels). This
change is creating many high pressures,” InvestorKit’s head of research, Mr
Paliwal and Suburbtrends’ Mr. Lardner said.
"Most regions across
Australia are seeing a decline in days on market. This is likely to flow onto
prices and a reduction in vendor discounting across house markets,” they noted.
article source: https://www.smartpropertyinvestment.com.au/
Tuesday, 2 February 2021