RESERVE BANK PREPARES FOR AN EASING IN THE CASH RATE
SUMMARY
• Dr Philip Lowe ’ s message signals a historic RBA policy pivot .
• Auction clearance rate the strongest it has been all year .
The Reserve Bank of Australia ( RBA ) has hinted that there ’ s another rate cut on the cards within weeks . In fact , the RBA even suggested that rates may not rise for at least three years . So this low interest rate environment , which is helping underpin the strength in the property market , may be here for some time to come .
The RBA ’ s Governor , Dr Philip Lowe , last week paved the way for more extraordinary monetary stimulus next month and set up a historic pivot away from the 25-year old inflation targeting regime . borrowing costs of homeowners , whilst also compressing deposit rates and thereby encouraging investors to enter the market .
Ever since the onset of the pandemic , the market has been characterised by low rates and strong banking support , both of which have underpinned record levels of activity . These recent announcements give even more confidence to both vendors and buyers to transact in today ’ s market , knowing that now the medium term outlook for investing in real estate is backed by RBA policy .
Dr Lowe said cutting rates to 0.1 per cent as the economy opened back up would “ get more traction ” than would have been the case during widespread restrictions earlier in the year . His statement effectively laid the rhetorical groundwork for further easing at the bank ’ s next board meeting on 3 November .
He also said the RBA will not be increasing the cash rate until actual inflation is sustainably within the target range . “ On our current outlook for the economy – which we will update in early November – this is still some years away . So we do not expect to be increasing the cash rate for at least three years .”
The big four bank economists now all expect the cash rate to be cut to 0.10 per cent on Melbourne Cup day . This decision , together with the RBA ’ s three year interest rate strategy , underpins its ambition to achieve asset price stability not just in the short term , but also for the medium term . For the property market , it will reduce
We are seeing more buyers with pre-approved loans and registered bidders at our auctions than we have seen all year . In fact , last week was the first time our network ’ s auction day clearance rate held above 72 per cent . That ’ s up 16 per cent on the same week last year . Spring selling season continues to produce strong clearance rates in most markets while average registered bidders hit record highs nationally .
Last Saturday , the Ray White Group - which can boast a 30 per cent auction market share nationally - recorded a whopping 5.7 registered bidders per property showing stock levels are struggling to keep up with intense buyer demand . We expect property activity for the balance of the year to be stronger than it was pre-COVID . There is a natural window open , between now and Christmas , that offers an opportunity to sell into a strong market . We simply do not know what the future holds in 2021 , but right now listing activity is being welcomed by extraordinary buyer demand . What are you waiting for ?
4 The information is general information only , not financial advice , and does not take into account your individual objectives , financial situation or needs .