Yahoo Finance Property market turns a corner as historic rate decision looms
Australian home values fell 0.4 per cent over May, marking the smallest month-on-month fall in a year.
It brings the decline in national dwelling values since an October 2017 peak to -8.2 per cent, CoreLogic research today revealed.
The fall comes as economists overwhelmingly predict the Reserve Bank of Australia will cut rates on Tuesday 4 June, bringing the official cash rate to a record low and ending a record streak of hold decisions.
Home loan rates are currently at their lowest since the 1960s, with a strong likelihood that the banks will pass on the full rate cut to homeowners.
This in turn would likely trigger stronger housing demand.
“Lower interest rates may not provide the same level of stimulus as what we have seen in the past, due to tighter credit policies, but no doubt, lower rates will still provide some positive influence over the housing market,” CoreLogic research analyst Tim Lawless said.
But a cash rate cut is far from a silver bullet, he added.
"Although interest rates and serviceability tests are set to reduce, lenders are continuing to scrutinize incomes and expenses much more intensely,” he explained.
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“Comprehensive credit reporting is providing lenders with greater visibility around borrower finances and overall debt levels, and progressively lenders are reducing their exposure to borrowers with high debt levels relative to their income."
And, he added, for the Reserve Bank to cut rates indicates a generally weaker economy.
“Policy makers are becoming increasingly concerned about prospects for economic growth and stubbornly low inflation. The labour market is seeing some cracks emerge and global trade tensions remain high. If the economy continues to lose momentum, we could see further weakening in labour markets and a continuation of weak wages growth.”
Let’s break it down
Tasmania marked the second consecutive month of falls, signalling a broadening of the property downturn. But Tasmania’s 0.4 per cent fall was little compared to the 1.6 per cent and 1.0 per cent falls in Darwin and Perth respectively.
Sydney and Brisbane slid 0.5 per cent while Melbourne fell 0.3 per cent, followed by Canberra which fell 0.2 per cent.
Adelaide was the only capital city to record an increase in dwelling values, up 0.2 per cent.
But, while the decline is broad, the impact is lessening.
Nationally, the smallest decline in a year was largely driven by Sydney and Melbourne’s smaller declines. Those two cities were previously falling at the fastest rates in Australia.
“In other cities, where housing market conditions have generally been more resilient to a downturn, the trend is opposite.”
As in April, few of Australia’s best performing sub-regions actually marked increases in property values, again indicating the widespread nature of the property decline.
The Reserve Bank of Australia will announce its interest rate decision for June on Tuesday 4 June 2019 at 2:30pm.
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