Fears that the two per cent cash rate will have serious ramifications for the housing market were revealed just minutes after yesterday's RBA announcement.
Loan Market chairman Sam White said the rate cut could accelerate the introduction of stronger macroprudential measures in a bid to slow down the Sydney property market.
"We can’t ignore its impact on the property markets – particularly Sydney,” Mr White said, adding that discussion around limiting activity in the Sydney housing market could ramp up among regulating bodies.
“If the Sydney market keeps moving, the issue of affordability must be addressed.
“I think the regulators will be eager to find measures to slow things down.
“Talks around limits on negative gearing, self-managed super fund investment and foreign investment could all be on the table,” he said.
Having seen significant growth in Sydney since the RBA’s last cut in February, Mr White believes today’s decision will further increase energy in the Sydney real estate market.
“It’s in no-one's best interests for the market to become unaffordable or unsustainable,” he said.
“If we see another spike in activity, it will force regulators to make tough decisions around measures to slow it down.
“My desire is to see a stable property market, which offers long-term value and gives confidence to home owners and investors.”
Meanwhile, Laing+Simmons general manager Leanne Pilkington said Australian real estate “in no way needed another interest rate cut today” as the market is already “red hot”.
“The RBA would have been wise not to pour further fuel on Sydney’s property fire,” Ms Pilkington said.
She noted that the current state of the market, especially in Sydney, is resulting in new suburban records regularly tumbling and vendors enjoying windfalls.
Ms Pilkington said rock-bottom interest rates are continuing to play into the hands of investors.
“Investors have been the real winners in recent times as first home buyers fail to experience any respite,” she said.
“Governments around the country must come up with new policy initiatives to improve the prospects of those genuine first home buyers committed but unable to break into the market.”
Ms Pilkington warned that without intervention more Australians will abandon the dream of home ownership.
However, not everyone saw a negative side to the RBA announcement.
Moments after the central bank announced the news, Mortgage Choice stated that borrowers have been given reason to celebrate.
“If February’s rate cut is anything to go by, borrowers can expect their lender to pass the RBA’s latest rate cut on, taking home loan rates to new lows,” Mortgage Choice chief executive John Flavell said.
“This opens up a great opportunity for home owners and potential home buyers alike.
“If you have been in the same mortgage for the last few years, you may find there is another product that is not only cheaper, but more suitable to your needs.
“Alternatively, if you are looking to get onto the property ladder in the not-too-distant future, now may be a great time to do just that.”
Shane Oliver, chief economist at AMP Capital, believes the rate cut makes sense.
“National income is still falling with lower commodity prices. Household demand has picked up but the business investment outlook is bleak and public spending is likely to be soft. And at the same time inflation is benign providing no barrier to a cut and the Australian dollar remains too strong,” Mr Oliver said.
“Sure the Sydney residential property market remains too strong, but home price growth in the other capital cities is weak at just 1.7 per cent year-on-year, and so it is right to put Sydney aside and set rates for the average of Australia as a whole, which needed a cut.”