Continued RBA support & price growth – Sept 2021
Spring is here, typically the busiest time of the year for our real estate and finance world. As vaccination rates rise, lockdown restrictions ease, and the Reserve Bank of Australia (RBA) continues its stimulus support, what will happen to house price growth? We explore this and more in this month’s Black & White Finance September 2021 update.
RBA continues the support
This September, the RBA revised its stimulus commitment in response to the coronavirus-induced economic slowdown, confirming that it would increase the amount of cash it would inject into our economy all the way through to February 2022. To be more specific, this is the RBA’s bond purchasing program known as quantitative easing and it has increased its size of support from $105 billion to $147 billion, or $4 billion per week all the way through to February 2022.
The RBA will continue to purchase Australian government bonds and pump money into the economy. This will have a large supporting impact on our interest rates and it is widely expected by economists and the RBA, that rates will remain as low as they are now until the end of 2023 or early 2024. The RBA has recently reaffirmed the 0.1 per cent overnight cash rate would not rise until inflation was sustainable, within 2 or 3 per cent (their target range).
The lockdown is costing the economy about $2 billion per week, Gross Domestic Product (GDP) has declined materially, and unemployment rates are moving higher, so it’s not that surprising to see this stimulus continuing.
Spring is in the air
In August, total active listings were 29 per cent below the monthly average in our real estate market, according to data presented by Tim Lawless from Corelogic RP Data. Experts believe this was mostly due to the lockdown and a little to seasonal factors, but demand was still strong across most markets, with buyers soaking up what little stock is and has been available. As vaccination rates rise, lockdown restrictions ease and the weather warms up, it is expected that listings should rise, creating more supply.
It will be interesting to see how the market responds to listings being ramped up. August saw a 1.5 per cent national monthly growth rate, while this is still growth, it was the slowest monthly result since January this year. As you can see also in the table below, the trend is slightly downwards which is likely a result of growing affordability issues given how far & how quickly the market has spring boarded of late. It’s also likely to be a result of the lower consumer confidence caused by this pandemic.
Final thoughts
It is expected that house price growth figures will plateau now with the additional Spring housing supply, and high property prices which is causing affordability constraints. The slower growth would be welcoming news to those trying to buy at the moment. Not necessarily bad news for those sellers who can rest very easy knowing that in the last year, they’ve achieved 18.4 per cent in dwelling value growth. Most people in the industry are still keeping a watchful eye on what the Australian Prudential Regulation Authority (APRA) does as there’s the potential for them to implement tighter regulations to slow the speed of lending. We will continue to watch this all very closely nevertheless, while we all enjoy the warmer weather and the official ‘reopening’.
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