INTEREST RISE NOT EXPECTED
‘NO PRESSURE’ TO LIFT RATES
THREE WA property experts expect the official cash rate to remain unchanged at 1.5 per cent at the Reserve Bank of Australia’s (RBA) first meeting for 2018 today.
Realmark managing director John Percudani said with the current “cold front” hitting the eastern states market and little prospect of inflation and wage growth in the short term, an imminent increase in housing finance interest rates was unlikely.
“We do, however, need to be aware that the cost of funding is on the rise, especially for fixed and longer-term finance,” he said.
“Regardless of whether or not an increase will be produced, this will be from a base cost of finance that is at an attractive and historically low level.”
Peard Real Estate chief executive Peter Peard said the RBA was under no pressure to move the cash rate.
“Inflation remains within the target range of the RBA and while there has been strong employment growth over the past year, wages growth has been virtually stagnant,” he said.
“Also, the big banks have increased interest rates out of cycle for investors, which has successfully cooled off the booming Sydney and Melbourne property markets.”
Harcourts WA chief executive Paul Blakeley also expected the official cash rate to remain unchanged, although he said a rise may be possible in the last three to six month of 2018, depending on the eastern states’ market.
“The larger states have had a good couple of years in relation to value increases and if this continues the RBA will want to bring the heat out of the market, which may mean a slight increase,” he said.
Mr Percudani also believed there was the potential for rate rise in late 2018 or early 2019.
“This will of course depend solely on economic conditions, which are looking increasingly favourable at a time when there is high liquidity in the global market,” he said.
“Looking closer to home, we must also take into account the drive for tax cuts which could potentially influence the RBA to consider interest rate changes.”
Mr Peard expected rates to remain stable.
“In this environment, the RBA wants to continue to encourage consumer spending through a low interest rates regime,” he said.
Any interest rates rises were not expected to have a significant effect.
“Confidence in residential property is as high as it’s been in some time,” Mr Blakeley said.
“We have seen improvement during the last six months of 2017 and we expect that to continue into 2018.
“Also, banks are confident Paul Blakeley enough to aggressively target the residential property market; one of the Big Four has just introduced a variable rate of 3.5 per cent, which is the lowest we’ve seen in nearly 60 years.”
Mr Percudani said although changes to interest rates had a direct and immediate effect on the property market, there were other factors to consider, including employment security and population growth, which went handin-hand to drive demand.
“Collectively these factors are looking positive for the WA market,” he said.
“It should also be noted that any adjustments in interest rates are likely to be marginal and this, combined with the affordability of the local market, suggests a promising position.”
Mr Peard said Perth was one of the most affordable capital cities in Australia for homebuyers and the stable interest climate helped reinforce consumer confidence.
“Peard Real Estate Group has seen this growing confidence translate into greater activity, especially by first-homebuyers who can now secure home loans to buy established homes for around 3.5 per cent,” he said.