Rates Tipped to Stay as They Are
01.06.10

Peter Martin, The Age.com.au

The Reserve Bank is tipped to leave interest rates as they are as previous rises have hit the property market.

THE Reserve Bank is considered certain to leave interest rates on hold for the first time since February when it meets this morning after clear signs its half a dozen near-consecutive rate rises have hit borrowing and property prices.

PR Data figures released yesterday show 'anaemic growth' in housing prices of just 0.2 per cent in April, the first month since the depth of the financial crisis in 2008 that seasonally adjusted prices have climbed by less than 0.5 per cent.

In Brisbane, Perth and Darwin, prices actually fell. In Melbourne the growth rate halved to 0.8 per cent; in Sydney it was cut by two thirds to 0.3 per cent.

Melbourne house prices had jumped 18 per cent in the year to April, and unit prices 19 per cent.

CommSec economist Savanth Sebastian said the 'perfect storm' for the housing market was over.

'Interest rates are rising, the government has withdrawn some special grants, the supply of new homes is rising and housing finance has fallen to nine-year lows,' he said.

Private sector borrowing also grew just 0.2 per cent in April, the slowest growth in five months and well down from the 0.5 per cent recorded in March.

Home loans grew 0.5 per cent and personal loans 0.2 per cent while business loans slipped 0.4 per cent.

Real estate agents expect a jump in the number of properties on the market in the next two weeks as sellers try to get in ahead of declining buyer confidence.

The Real Estate Institute of Victoria is predicting 1210 auction listings in the fortnight, the most on record for this time of year.

'The six interest rate rises totalling 1.5 percentage points are impacting the market,' said REIV chief Enzo Raimondo. 'Higher stock levels will provide buyers with more opportunity and reduce pressure on prices.'

Macquarie group economist Rory Robertson said he considered the Reserve Bank certain to leave interest rates 'on hold' at today|s meeting, having succeeded in returning most rates to around their average levels.

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