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Cash rate cut to 2.75pc

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The Reserve Bank has today announced that it will drop the cash rate by 25 basis points, down to 2.75 per cent.

The RBA is likely to be reasonably comfortable with the pace of the housing market recovery, said RP Data head of research Tim Lawless, with dwelling value trends continuing to recover over the first four months of the year.

“Despite the fact that capital city dwelling values fell by half a per cent over the month of April, the quarterly growth trend is a sustainable 1.1 per cent and buyer activity is rising, particularly across the investor segment and non-first home buyer segment,” Mr Lawless said.

Further highlighting the improving housing market conditions, clearance rates remain close to the 70 per cent mark, suggesting that buyers and sellers are increasingly finding the middle ground in their pricing expectations, he said.

“Additionally, the Housing Industry Association has been reporting a fairly consistent improvement in the number of new home sales, albeit from an extremely low base," he said. 

What may be concerning to the RBA though is the pace of dwelling construction and consumer appetite for newly constructed homes.

Lower interest rates may be the means for the construction sector to pick up, Mr Lawless said.

“Dwelling approvals and commencements remain weak and although new home sales have improved, according to the HIA, the number sold remains historically low.  If we are to see the construction sector pick up where the mining boom is leaving off, lower interest rates may be the catalyst that is required.”

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