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The Reserve Bank of Australia (RBA) announced yesterday (June 4) that the cash rate will remain unchanged at 2.75 per cent, following a 0.25 per cent reduction last month.
Peter Bushby, president of the Real Estate Institute of Australia, said the RBA's decision to keep the cash rate at a "historically low" rate was not surprising.
He attributed an increase in loan commitments and higher auction clearance rates to the recent interest rate cuts and the improvement in affordability.
"The first quarter of 2013 continued the trend with the proportion of income required to meet loan repayments decreasing 0.5 percentage points to 29.9 per cent," he said in a statement released June 4.
"This is the best level of housing affordability since the December quarter 2009 and I am pleased that most states and territories recorded improvements."
He said that while changeover owner-occupiers and investors are quickly returning to the market, first home buyers are holding off - making up only 14.2 per cent of the owner-occupier market in March 2013.
However, the Housing Industry of Australia (HIA) said the RBA decision not to follow up last month's interest cuts with further reductions was a disappointment.
Shane Garrett, HIA's senior economist, said in a June 4 statement that a further reduction in rates was warranted.
He cited struggles in the home building industry's economic activity as evidence of this, saying house building is "substantially lower" than a decade ago, despite the population being at a record high.
He warned of a housing shortage for real estate in Australia at the end of this decade if this trend continues.
"We want further interest rate cuts to follow speedily. It is clear that the reductions so far have been helpful in nudging economic activity in the right direction," he said in the statement.
"More rate reductions will greatly improve the chances of a self sustaining recovery taking hold in house building and other sectors of the economy."
