The Reserve Bank (RBA) released the minutes of their November Board meeting earlier this week. At the meeting, the RBA Board decided to keep official interest rates on hold at 2.5%. The important references to housing and the economy are detailed below.
‘Members noted that conditions in the housing market continued to strengthen. Nationally, dwelling prices were above their late 2010 peak, with prices over the three months to October increasing significantly in Sydney. Housing turnover and loan approvals had picked up noticeably. [sam id=36 codes=’true’]
Improved conditions in the established housing market were providing an impetus to dwelling investment, with residential building approvals increasing over the year. Approvals increased notably in September, driven by a pick-up in high-density approvals, which tend to be quite volatile from one month to the next.
In discussion, members observed that developments in the established housing market and the increase in new dwelling activity seen to date were among the expected effects of the low level of interest rates.’
‘At recent meetings, the Board had judged that it was appropriate to leave the cash rate unchanged while continuing to gauge the effects, including in the housing market, of the substantial degree of monetary policy stimulus that had been put in place over the past two years.
There was mounting evidence that monetary policy was supporting activity in interest-sensitive sectors and asset values, and given the lags with which monetary policy operates, the stimulatory effects would likely continue coming through for some time.
At the same time, inflation remained within the target and the Australian dollar, while below its level earlier in the year, remained uncomfortably high. Members noted that a lower level of the exchange rate would likely be needed to achieve balanced growth in the economy.’
Based on their minutes, the RBA appears to be comfortable with housing market conditions and the positive flow-on effect of more dwelling construction and improving household wealth.
The RBA has clearly left the door open for further rate cuts if they see the need to do so; inflation is low and consumers are more positive and spending is on the rise.
Despite many of the forward indicators looking more positive, the catalyst for a further rate cut, if there is to be one, is likely to be a more significant than expected softening in labour market conditions or an upturn in Australian dollar.
It’s important to note that financial markets (based on the ASX cash rate futures implied yield curve) are no longer pricing in any further rate cuts; in fact the yield curve suggests that rates will be under some upwards pressure through late 2014.
National Auction Clearance Rates
The number of auctions across the combined capital cities increased further last week from 2,548 over the previous week to 2,814 auctions last week. The auction clearance rate fell over the week from 68.3% the previous week to 67.4%.
In Melbourne, there were 1,270 auctions over the week, up from 1,123 auctions over the previous week. Melbourne’s clearance rate increased to 69.0% last week from 68.1% over the previous week. Auction volumes across Sydney increased over the week from 1,043 the previous week to 1,099 last week.
Auction clearance rates fell over the week to 75.3% from 76.0% over the previous week. There are currently 2,526 capital city auctions scheduled for the current week.
Weekly Advertised Listings
Over the four weeks to 17 November 2013, there were 51,300 newly advertised properties listed for sale nationally, the highest number since late November last year.
The number of new property listings increased by 2.4% over the week however, new listings remain -2.9% lower than at the same time last year. Across the combined capital cities, new listings were 2.6% higher over the week and are 0.7% higher than they were a year ago.
There are currently 253,816 properties listed for sale across the country. Total listings at a national level have fallen by -4.0% over the week and they are -11.4% lower than they were at the same time last year.
Across the combined capital cities, total listings have fallen by -4.9% over the week and they are -17.5% lower than they were at this time a year ago. Capital city listings account for around 44% of all listings nationally.