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The central bank has decided to cut the official cash rate by 25 basis points, taking it to a new record low of 1.75 per cent.
The RBA’s quick response to cut interest rates to new historic lows is not surprising given current economic conditions, according to LJ Hooker Home Loans.
Chief oerations officer and head of LJ Hooker Home Loans Paul O’Regan believes a turbulent past week on the world’s stock market simply pushed forward the RBA’s plans.
It is likely to help the struggling Perth, Adelaide and Hobart property markets and improve affordability in strong growth centres such as Sydney and Melbourne.
“There was a time where people just wouldn’t have believed interest rates would be cut to such a level but the thing is that this has been on the drawing board for some time,’’ Mr O’Regan said.
“The key thing to watch is when the RBA go out of step with the market but this was anticipated and is a reflection of the broader macro environment.
“They have seen how being responsive can benefit the economy – so they are inclined to favour this type of strategy now.’’
Softer property price growth, a decline in consumer sentiment and the fall-out from Chinese economy are also catalysts for the reduction, he said.
Mr O’Regan does not believe today’s announcement will further fuel Sydney and Melbourne house prices. Recent sales figures and auction clearance rates suggest some softening in the market, with listings slowly increasing as vendors try to bid to beat the traditional spring rush.
LJ Hooker real estate agents have conducted a higher number of house appraisals over winter than usual, indicating there could be more stock coming onto the market before Christmas.
It is good news for homebuyers with the rate of growth in Sydney expected to fall to a more sustainable level, however, will still be higher than average.
“We are still going to see some spectacular sale results but I suggest that these will become a bit more one off – it will be property by property,’’ Mr O’Regan said.
“There is a risk that vendor price expectations will see days on the market increase and auction clearance rates will come back, because they will be a bit out step of with what is happening.
“Invariably buyers come within the first two weeks of your campaign, so if you don’t have your buyer or turn them away leaving your home on the market then people will start to question whether there is something wrong.’’
Mr O’Regan believes quality lifestyle homes in Sydney and Melbourne will continue to attract a premium over spring. Affordability and employment opportunities in South-East Queensland are expected to drive migration north boosting price growth, particularly for freestanding homes around the Gold Coast.
LJ Hooker national research manager Mathew Tiller said while spring won’t be a “buyer’s market’’, the availability of stock will make a difference to those who have missed out on purchasing due to strong buyer demand and low levels of listings over the past 18 months.
Lower interest rates will also be enticing for those still trying to break into the property market.
Furthermore, Mr Tiller called on the Federal Government to support monetary policy stimulus with confidence and productivity boosting reform combined with further spending on infrastructure.
“They need to look at fiscal policy measures that could potentially super charge this much needed interest rate cut,’’ he said.