The Australian housing market continues to motor along, with sales demand strong for this time of year, and home prices consolidating the strong gains of recent times.
According to the latest data from ANZ, home prices continue to edge higher, with price growth stabilising at 12.5% in annualised trend terms. Home prices increased solidly in Melbourne, to be up nearly 2% over the last month, followed by almost 1% gains in Sydney. On an annual basis, Sydney still leads the charge with annual growth of about 15%, ahead of Melbourne with 11% and Brisbane with almost 7%.
Auction sales continued to reflect buoyant home buyer and vendor sentiment, and dare I say it, continued low interest rates
, with auction sales elevated for this time of year. In the final few weeks before we hit the peak Spring selling season, strong clearance rates in Sydney and Melbourne in particular foreshadow strong sales demand and further housing price gains in the remaining months of 2014.
That said, I think it would be a sensible move for our Reserve Bank to follow the lead of its European counterpart, the European Central Bank (ECB), in moving its monetary policy meetings to a six week cycle.
Quite often, the lead up to an RBA board meeting can be front page news, and this hype and speculation leaves buyers and sellers holding their breath in the weeks before and after the outcome is announced, which stymies real estate activity. Decisions made by the RBA can tend to take a few months to work their way through to consumer confidence, business activity and ultimately the real estate market, yet the RBA can make a change to monetary policy every month.
To be fair, the impact of the monthly meetings is not as emphatic in a bull run like we’ve enjoyed over the past two years, but I’m more concerned about the effect when the RBA starts tightening monetary policy with a series of hikes, which is expected to begin later this year or early next.
Even if the average mortgage repayment only goes up by $50, it can take homeowners two weeks to re-calibrate what they can afford. This is why longer intervals between meetings could give the RBA more time for its decisions to work their magic, and minimise the impact that the meetings have on business and investment activity.
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