Looking into Australia’s housing market
Reserve Bank has decided to cut interest rates thanks to economic and inflation forecasts on top of housing market developments. The bank’s governor Glenn Stevens did offer a hint with his statement following claims that RBA cut as much as 25 basis points in its cash rate target to 1.5 percent which is a record low.
According to a report from ABC, the quarterly Statement on Monetary Policy support the large role that Australia’s housing market played in the decision of the board.
“The board had taken careful account of developments in the housing market, noting the effects of supervisory measures to strengthen lending standards, the easing in housing credit growth and the abatement of strong price pressures,” noted the statement.
More importantly, the Reserve Bank has also gotten rid of the long-standing preference for CoreLogic’s (formerly RP Data) figures in order to confirm the easing of the east coast housing bubble. The organisation has turned to Fairfax-owned APM and the Real Estate Institute of Australia instead.
“While one source of data recorded strong growth in housing prices in April and May, that growth appears to have been overstated and other sources suggest that housing price growth was modest over those and more recent months,” RBA added in its statement.
The Reserve Bank has also been focusing on China’s recently booming residential property sector. The organization warned: “Recent falls in residential floor space sold and the slowing in residential construction investment raise some doubts about the durability of the pick-up in demand earlier in the year.”
There is a reason why there should be concerns over the Chinese real estate.
“A substantial slowing in demand in the Chinese property market would pose risks for property developers and related industries, including the steel industry,” the RBA answered.
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