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#1 The cash rate remains on hold - what does that mean to property?
No surprises the RBA kept the cash rate on hold this month. The number everyone will be watching closely this month will be inflation with the June quarter number available on July 28. In March, inflation remained well below the RBA target of between two to three per cent. It is expected to creep up in the next available figures - as the economy re-opens, people are spending more and we are also seeing unemployment come down very quickly which is putting pressure on wages.
Interestingly, despite no move on the cash rate, an analysis by Corelogic research suggests mortgage rates are continuing to come down. It is likely that this will be short lived. Over the past month, we have seen some increases to fixed mortgage rates and serviceability criteria have tightened. Nevertheless, finance does remain incredibly cheap and this is part of what is turbocharging the property market. Across Australia, house prices have increased by 15 per cent since the start of the pandemic. At this stage, we are seeing very little evidence of a slow down although any increases to mortgage rates, plus higher than average properties for sale, should calm the very high price growth occurring.
#2 Gap between auction sale price and highest previous offer is now at record highsShould you sell prior to auction? A look at the gap between auction sale price and highest prior offer over the past 18 months for more than 9,500 auctions suggests that it is never really a good idea. It is particularly not a good idea now where the gap is currently at a record high of 13.1 per cent. The gap is currently highest in Perth, not surprising given how quick the market is now moving in that city.
#3 New Zealand is the world's "bubbliest" housing market
It uses a bit of a fussy methodology however it is interesting to see Bloomberg's analysis of what they refer to as the world's "bubbliest" housing markets. The index looks at factors such as the price to rent ratio, price to income ratio, real price growth, nominal price growth and annual credit growth to gage how much of a bubble the market is in. Coming out on top is New Zealand, followed by Canada and then Sweden - these are markets that Bloomberg see as those where a price bubble has most likely formed. Australia is more of a fizz at number 15.
#4 Dwelling approvals declined in May
With the wind down of HomeBuilder, it was not surprising that dwelling approvals pulled back in May. The biggest decline was in Queensland, while Victoria and Tasmania actually saw increases. The outlook for new dwellings is continued stabilisation of new house builds (this sector was the key beneficiary of HomeBuilder) but a slight pickup in apartments. Investors are well and truly back out buying (investor lending is at its highest level since 2014) and they are the main buyers of apartments in Australia.
