Earlier this week the Reserve Bank (RBA) released the minutes of their May 2016 board meeting.
At that meeting they decided to reduce official interest rates to a new historic low of 1.75%.
Since the meeting, the RBA has also released their Statement on Monetary Policy in which they have significantly reduced their forecasts for inflation which suggests that there may be further interest rate cuts during 2016.
The key takeaways from the minutes were:
- CPI had been lower than expected with the weakness in domestic cost pressures broad-based. Non-tradeable inflation was at its lowest end of year rate since the early 1990s while tradeable inflation had shown little change.
- Employment growth slowed over the first quarter of 2016 however, it remains stronger than population growth. The RBA anticipates that
employment will continue to increase, albeit at a slower pace than over the previous year. Subsequently the RBA expects the unemployment rate to remain at similar levels (5.8% currently) over the next 12 months before gradually falling.
- The RBA is forecasting that the impact of low interest rates and the fall of the exchange rate over recent years would gradually strengthen the economy to an above average rate of economic growth.
- There remains a substantial volume of residential construction work in the pipeline and subsequently the RBA expects further strong growth in dwelling investment however, they expect that rate of growth to gradually decline
- Following declines late in 2015, the RBA notes that home values are increasing moderately. They also note the pull-back in housing credit growth had eased a little to around 7% in the past six-months in annualised terms.
In coming to their decision to cut official interest rates the RBA noted:
‘…developments over recent months had not led to a material change in the outlook for economic activity or the unemployment rate, but the outlook for inflation had been revised lower.
At the same time, they took careful note of developments in the housing market, which indicated that supervisory measures were strengthening lending standards and that the potential risks of lowering interest rates therefore were less than they had been a year earlier.
Members discussed the merits of adjusting policy at this meeting or awaiting further information before acting.
On balance, members were persuaded that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting.’
Over the week ending May 15 there were 1,876 capital city auctions with CoreLogic collecting results for 1,737 auctions, accounting for almost 93% of all auctions held.
The final clearance rate was recorded at 69.5% which was an increase from the 67.7% over the previous week.
The number of auctions decreased from 2,230 over the previous week.
Last week, across Melbourne, typically the largest capital city auction market, 871 auctions were held with a clearance rate of 71.3%. Melbourne’s clearance rate fell slightly from 73.2% across a higher 1,150 auctions over the previous week.
Sydney’s auction clearance rate was recorded at 76.2% across 647 auctions compared to a clearance rate of 71.8% across 676 auctions the previous week.
Across all other regions except for Tasmania (where the clearance rate was unchanged) auction clearance rates were higher over the past week.
Melbourne clearance rates have been above 70% for six consecutive weeks and in Sydney they have been above that mark for four weeks, indicating that buyer demand remains strong.
Note that sales listings are based on a rolling 28 day count of unique properties that have been advertised for sale.
Relative to the same period last year, the number of new listings over the past twenty eight days is 2.1% higher on a national basis and the total volume of stock on the market is 0.3% higher.
Across the combined capital cities, new listings are 1.9% higher relative to last year, while total listings are 8.4% higher.
On a city by city basis, Sydney (-3.6%), Perth (-11.1%), Hobart (-4.9%) and Darwin (-25.3%) are seeing a lower number of new listings than a year ago.
In terms of the total stock available for sale, Hobart (-29.1%) and Canberra (-12.9%) are the only capital cities to have fewer total properties for sale than a year ago.
Nationally, new property listings are now at their lowest level in three weeks while total listings have increased over the week.
Across the combined capital cities, new listings are at their highest in three weeks and total listings are at their highest level in seven weeks.