The Reserve Bank (RBA) released the minute of their August board meeting earlier this week. At the meeting the RBA decided to reduce official interest rates to 2.5%; a low not seen in more than 50 years.
The minutes noted that the news relating to domestic activity over the month was consistent with economic growth being below trend in the June 2013 quarter. Specifically relating to the housing market the minutes noted; ‘The housing sector had continued to improve.
Auction clearance rates remained high and dwelling prices had increased further in recent months. A number of indicators were pointing to a further recovery in dwelling investment, consistent with the low level of interest rates.
Residential building approvals, especially for detached housing, had increased in the June quarter and loan approvals were at their highest level in over three years. Members did, nevertheless, note that dwelling investment had thus far experienced a muted recovery relative to past cyclical upturns.’
[sam id=37 codes=’true’] Relating to the decision to reduce interest rates the minutes noted; ‘Regarding the communication of this decision, members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further.
The Board would continue to examine the data over the months ahead to judge whether monetary policy was appropriately configured.’ This would seemingly indicate that the RBA board is hopeful that the interest rate cuts to-date would provide enough stimulus and they are taking a wait and see approach to further rate cuts.
News from across the ditch this week was that the Reserve Bank of New Zealand (RBNZ) announced a significant regulatory shift this week. From 1 October 2013 New Zealand banks are required to limit their residential lending for loan to value ratios (LVR) above 80% to a maximum of just 10% of the value of all new loans.
The hope is that this new policy will reduce more risky lending in the market which in-turn is anticipated to reduce the chances of future housing bubbles.
The fact that less lending is available for those loans with a LVR of above 80% is likely to mean it is more difficult for first home buyers to enter into home ownership because there will be increased competition for these higher LVR loans and fewer available. Obviously regulators in Australia will be closely watching to see the effectiveness of these changes.
National Auction Clearance Rates
The weighted average auction clearance rate over the past week was recorded at 70.4% across 1,470 auction, up from 70.1% across 1,441 auctions the previous week.
The major auction markets of Melbourne and Sydney continued to record a strong rate of successful auctions. Melbourne’s clearance rate over the week was steady at 71.0% over the week with 668 auction last week, slightly down from the 677 auctions the previous week.
In Sydney, auction clearance rates were recorded at 77.1% last week across 568 auctions, up from 76.3% the previous week across 521 auctions. RP Data is currently anticipating 1,391 capital city auctions over the current week.
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