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The Reserve Bank of Australia has made its first call on the official cash rate for this year following its decision to cut the rate to a historic low in November.
RBA makes first cash rate call of the year
02 February 2021
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4 minute read
In line with expectations, the RBA has held the cash rate at a record low of 0.1 of a percentage point.
According to analysts, the record-low interest rate, which is predicted to stick around for another few years, will send property prices soaring.
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According to a document released by the RBA last month, following a Freedom of Information request, a permanent 1 percentage point (100 basis point reduction) cut in the official rate could increase real housing prices by 30 per cent over three years.
With the RBA clearly alert to the risks from low interest rates, property experts believe the bank’s predictions are fairly accurate.
“With what we can see today based on recent shifts in inventory levels, we would be comfortable in saying the RBA forecast will apply in 75 per cent of regions,” self-proclaimed data nerds Arjun Paliwal and Kent Lardner told sister brand Smart Property Investment.
According to their analysis of inventory level trends over the last two years, a substantial decline in stock levels is evident, creating high price pressure.
“There has been a dramatic decline in stock levels relevant to sales volumes (inventory levels). This change is creating many high pressures,” InvestorKit’s head of research, Mr Paliwal, and Suburbtrends’ Mr Lardner said.
“Most regions across Australia are seeing a decline in days on market. This is likely to flow onto prices and a reduction in vendor discounting across house markets.”
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