The Reserve Bank’s announcement in early May that the official cash rate would be cut by 25 basis points for the second time this year and to a historic low of 2% had been long awaited. A rising Australian dollar and a struggling economy were the key drivers behind the cut, but after a brief fall the dollar marched even higher, pushing above US80c in overnight trading.
Although home owners were rejoicing at the prospect of even lower home loan rates, only one of the big four banks passed on the cut in full, reducing its variable rate by 0.25%. The Commonwealth Bank and National Australia Bank cut variable loan rates by just 0.20%, while Westpac cut 0.22% off its rate.
Meanwhile in the property market, the latest RP Data CoreLogic Home Value Index has revealed prices in Melbourne have risen 1.6% over the past quarter, with analyst Tim Lawless saying the city has caught a second wind this year. Melbourne prices are now 52.3% higher than recorded during the global financial crisis (GFC).
SQM Research director Louis Christopher says Melbourne sellers may face even better conditions, with the latest data showing an abnormal decrease in the total number of properties for sale. Listings fell by 1% in April and are now 14.7% lower year-on-year.
In controversial news, two new state taxes due to be implemented on Victorian property purchases made by foreign purchasers have been criticised by some commentators as likely to negatively impact the market. The Real Estate Institute of Victoria however is supportive of the taxes, saying they are reasonable and appropriate and will not affect the market. As of July 1st this year, a new levy of 3% will apply to non-residents buying property in the state, with an additional 0.5% levy due to apply to absentee owners who do not occupy their property.
While winter is traditionally a quiet season for the property market, the current conditions look set to offer exceptional selling opportunities with a high number of active and avid buyers.