Moody’s Analytics claims interest rate cuts by the Reserve Bank of Australia in February and May have added $8,000 to house prices in Sydney and Melbourne.
The study said national house values commonly jump by 0.5% every time the RBA cuts the official cash rate by 0.25%, reports Since the start of the year, the RBA has made two 0.25% cuts.
“Moody’s Analytics estimates that a 25-basis point rate cut adds approximately $4,000 to valuations in New South Wales,” the credit rating agency stated in its new national housing report.
“It is a similar story in Victoria, where median house prices rise and remain the second-highest in the
country, albeit the state’s stronger housing supply caps the gains.”
It added that house prices in NSW and Western Australia usually rise by 0.6% whenever interest rates drop by 25 basis points.
Moody’s Analytics also found a jump of 0.5% in Victoria and Tasmania, and a rise of 0.4% in South Australia.
Queensland and the Northern Territory also saw rises by 0.3% and ACT price went up 0.2%.
Contrary to industry fears, the study stated only three of Australia’s eight housing markets are overvalued when rents, incomes and mortgage rates are taken into consideration.
Victorian houses are overvalued by 8%, ACT is 6.2% overvalued and NSW is 2.9% overvalued.