RBA Emergency Rate Cut and COVID-19 Impact on Property Market

– During RBA’s emergency meeting held on 19 March 2020, decided to apply another interest rate cut of 25 basis to a new record low of 0.25%, providing two interest cuts in less than 3 weeks.

– The lowest Australia Dollar since October 2002 gives positive effect on property market, but given the current situation, very limited. It may help prevent the market fully back into down trend, but has less momentum to push the price up on the other side.

>> With the COVID-19 becoming a global crisis, in both health and financial sectors, most investors will become more conservative on following investing activities.

>> The plunges of global stock markets also put investors with less bullets they can use on property market.

>> Low dollar value will help on education sector, attracting more overseas students who may rent or buy properties. However current travel ban and potential shutdown of schools and colleges will put a break on their property investing plans.

– When COVID-19 crisis is over, hopefully before next Spring:

>> If only minimum increase on unemployment rate which means most people hold their jobs and incomes, the market will come back to the up trend. With government first home buyer stimulus, the market continues with more first home buyers jumping in.

>> If unfortunately significant portion of employees lost their jobs during this time, the low- and medium-range market will experience a hard time at least by the end of next financial year.

>> High end market normally has minimal connection with unemployment rate. However recent catastrophic plunges happened across all major stock markets globally and damage put on global business and tradings, will all affect how much money those high-end property buyers can use in their purchases.

>> High end property market will be on a case-by-case basis. But still the activity level will be no comparison with what it has before COVID-19 burst.

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Weekly Auction Clearance and Sales Results – 05 October 2019 Melbourne

– Number of auctions is in healthy range, though lower than the same time previous year

– Auction clearance stands robust above 60% and 70% for the 21th and 12th consecutive weeks respectively, with 76%, 75%, and 75% from all three sources

– On 01 Oct 2019, the Reserve Bank decided to cut interest rate by another 25 basis to a new historic low of 0.75%. This is the third cut after cuts in June and July and means the rate has halved within four months

– More calls from the public on the government reforms to boost productivity for long-term performance, which may include tax cuts, public housing, support new start-ups, infrastructure spending, etc

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Reserve Bank Keeps Interest Rate on Hold

– On today’s monthly meeting, RBA decided to put the interest rate on hold, remaining at 1%

– But expects another cut later this year, to increase inflation, lower unemployment rate and boost economic growth

– Consumer Price Inflation (CPI) data for Q2 2019 shows an improving annual growth in underlying inflation of 1.4%, headline inflation increased by 1.6%,but still well below RBA’s 2-3% Target

– The escalating US-China trade war also poses a risk to Australian economy

– Regarding the current property price downturn, in RBA’s statement, comments as there are ‘some signs of a turnaround, especially in Sydney and Melbourne

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Weekly Auction Results and RBA Cuts Interest Rate to 1 percent

– Auction clearance is now with no doubt in the proximity of 70%, and above 60% for the seventh consecutive weeks, with 73%, 69%, and 75% from all three sources

– Auction clearance is now higher than the same week last year, though the number of auctions is still less

– More media voices are now predicting the property price falls in Sydney and Melbourne will end later 2019 and mild price increases will more likely to be observed in 2020

– RBA cuts interest rates to a record low of 1 percent after a 25 basis point cut in June, with financial markets predicting the cash rate would fall to 0.75 percent or even 0.5 percent by mid-2020

– RBA would like to see the low interest rates to give the economy a boost, push the unemployment rate below 4.5 percent for the inflation to meet the 2 to 3 percent target

– The record low interest rates will also help the property market to stabilize its price falls observed in major cities, and hope to encourage more buyers, especially first home buyers into the market with the loan lenders more willing to take new loans on first home purchases than investing ones

– However RBA interest cuts may not be sufficient to turn around the weak Australian economy. Other measures such as tax cuts or spending on infrastructure may be needed

View More Weekly Auction Results and RBA Cuts Interest Rate to 1 percent

RBA Cuts Interest Rate to Historic Low of 1.25 percent – June 2019

– In today’s monthly meeting, Reserve Bank of Australia (RBA) decides to cut interest rate by 25 basis to historic low of 1.25% after leaving the cash rate on hold at 1.50% for almost 3 years

– In RBA’s statement, it stated that “today’s decision to lower – the cash rate will help make further inroads into the spare capacity in the economy. It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target”

– It is likely for RBA to have a second cut following today’s 25 basis cut, most likely in August

– The Big 4 banks followed the RBA’s decision, with NAB and Commonwealth pass on the full 0.25% cut whilst ANZ and Westpac pass 0.18% and 0.20% cuts respectively

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