While the Reserve Bank quietly announced the official cash rate would remain on hold at 2.5% for the third month in a row, the attention of most Australians was firmly focused elsewhere – on the nation’s biggest horse race.
The economic tipsters were out in force though, with the most recent data suggesting the current rate cutting cycle is now at an end. Futures markets are now pricing in a 63% chance the next official move will be upwards, although any change could be as much as a year away. Of more concern to the property market was the move by major lenders last week to increase interest rates on fixed rate loans, apparently due to increased global funding costs. ANZ, Westpac and NAB all increased their three year fixed rates by 20 points, while ANZ and NAB left four and five year fixed rates level.
Conversely, Commonwealth left its three year loan rate level, raising its four and five year rate by .20%. It’s the first time since 2010 that fixed rates have risen and commentators are saying out-of-cycle increases are now also on the cards for variable loan rates. But the latest data suggests the Melbourne property market is continuing to heat up unabated.
SQM Research reported the total number of Melbourne properties listed for sale rose by 3.9% last month, remaining 3.6% lower than October last year. Meanwhile, the Melbourne auction clearance rate remained above 70% throughout the month, showing demand is continuing to soak up supply.
The October RP Data/Rismark Hedonic Price Index showed Melbourne house prices rose by a further 1.2% during the month, bringing the year-to-date growth to 8.7%. Analyst Cameron Kusher said international factors are also driving the Melbourne and Sydney property boom, with recent data from NAB showing 13% of all new home buyers are Chinese.
While rapid price growth is leading to increased talk of a property bubble, many economists disagree. According to a report issued late in October by analyst BIS Shrapnel, Melbourne house prices will be only 6% higher in three years time. Regardless of an uncertain future, sellers in the current market have a clear opportunity to transact with willing buyers, provided they maintain reasonable price expectations.