The Reserve Bank of Australia (RBA) decision to keep interest rates on hold at the record low of 1.50 per cent at its first meeting of the year has come to no surprise to many pundits in the real estate industry.
Real Estate Institute of New South Wales (REINSW) president John Cunningham was unfazed.
“Housing affordability will be hotly debated in 2017,” he said in a statement.
“We expect more stock to come to market this year and we hope that that will cause the market to become more settled.
“An emphasis will again be placed on first homebuyers, and there will be much debate this year on ways to improve their plight. We hope that the government consults the industry in order to make the right decisions.
Cunningham reiterated that a review was urgently required on stamp duty especially for first home buyers and older Australians who want purchase properties.
REINSW president-elect and Laing+Simmons managing director Leanne Pilkington said further easing in cash rates by the RBA was not needed in the current cycle.
“Obtaining housing finance at attractive terms is already possible for those with the means. It’s those without the means – stuck in the rental cycle or unable to accumulate a suitable deposit – that face the greatest challenge in the market,” she said.
“And further rate cuts are not a solution to the problem. Between government and the industry, we need to table some alternative solutions to help people buy their first home.
“From a housing industry perspective, rates are already low and have been for some time, so that piece of the affordability puzzle is in place.
“It’s through other avenues like stamp duty reform that improvements in affordability need to be addressed,” she said.
Pilkington said what was lacking is a willingness to take real action by providing more options to first home buyers and older Australians.
She reiterated that among the options that should be available to these group of people were making the concept of downsizing more viable for older people to free up stock, introducing a government-backed savings scheme to help people accumulate a deposit, and minimising the cost of mortgage insurance could all have a positive impact on housing affordability.
“In New South Wales, the new premier immediately singled out housing affordability as the key issue to be tackled in the state,” she said.
“It’s encouraging for these discussions to be taking place, as it demonstrates that our politicians recognise the enormity of the affordability issue.
“But the time for action is overdue. From the industry’s perspective, our message to Government at all levels is clear: we’re here to work with you and to put some actual measures in place.”
Meanwhile, REA Group Chief Economist Nerida Conisbee said RBA’s decision to keep rates on hold today, however, there are signs that the next move may be down.
“A slew of negative economic data continues to spark concerns about the direction of the Australian economy. Inflation remains low, GDP contracted in the September quarter and retail trade figures released yesterday showed a decline in December, far more than expected. In addition, labour market capacity and the number of people looking for full-time work continues to cause concern.
“It is likely that concerns about the continued strength of the housing market in Sydney and Melbourne kept rates on hold, rather than a cut. Price growth at the end of the year came in far higher than most predicted. The REA Group Property Demand Index showed that although demand dropped in December following the decision by many banks to increase rates independently of the RBA, potential buyers were back out in force with the index recovering most of the December decline in January.
“Another factor is causing concern is the instability of global politics and the uncertain impacts this will have on our economy.
“Although rates are on hold for now, it is no guarantee that banks will not continue to increase interest rates. Partly on the directive of APRA to control their lending growth but also given their increased costs of funding and drive to maintain profits.”
Last year, the RBA cut cash interest rates twice, once August and in May, however, many banks have made decisions independently to increase these rates.
The RBA meets next on March 7.