The Reserve Bank’s June announcement that the official cash rate would remain on hold at 2% had been almost unanimously predicted by commentators. While disparity in expectations for future rate decisions continues, there appears to be no end in sight for the low interest rate environment, with the heady demand for property continuing unabated.
AMP Capital chief economist Shane Oliver believes there’ll be another cut, perhaps as soon as July. Domain Group senior economist Andrew Wilson expects there’ll be another two cuts before the year is over, citing bleak capital expenditure figures released in late May. But a survey by website Finder.com.au of 34 leading experts revealed that two thirds of respondents expected rates to remain on hold for the remainder of the year, with two in three expecting rates to begin rising again next year.
Late in May, treasury secretary John Fraser received a lot of media attention after he declared parts of Sydney and Melbourne as “unequivocally in a house price bubble”, but Mortgage Choice CEO John Flavelle said that the fundamental imbalance between supply and demand in housing does not support this statement. Meanwhile, research from Corelogic/RP Data has shown that while prices have risen significantly in both Sydney and Melbourne, the current rate of growth is actually much slower than that recorded during the last boom between 2001 and 2004. The current growth cycle has seen prices in Melbourne rise by 23.6% since May 2012, while in the previous cycle from 2000, Melbourne prices rose 58%.
Throughout last month, Melbourne auction clearance rates remained elevated, finishing at 78.3% for the last week of May. SQM managing director Louis Christopher said he does not believe the market has yet peaked, predicting total growth of up to 12% in Melbourne house prices for 2015.
While buyers need no encouragement currently in the environment of tight supply and low mortgage rates, property owners have ample opportunity to achieve healthy sales results, particularly at auction.
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