City housing markets get a boost after rate cuts

The housing market is shaping for a stronger second half after the Reserve Bank cut interest rates to an all-time low of 1 per cent.

Real estate agent Shannon Harvey is helping optimistic expectant mother Alissa Skinner buy a home. Picture: Lyndon Mechielsen

The housing market is shaping for a stronger second half after the ­Reserve Bank slashed interest rates to a low of 1 per cent, just 28 days after its previous cut.

Real estate agents unashamedly applauded the cut to the cash rate of 1 per cent but bankers such as HSBC said the sharpness of the adjustment suggested there were bigger economic growth fears.

Ray White chairman Brian White, who runs the nation’s largest real estate franchise, said the rate cut to 1 per cent was a further shot in the arm for the property market, which had already been showing signs of improvement.

The pivotal Sydney and Melbourne housing markets, as well as Hobart, have produced minor price rises while new home sales are dramatically improving.

HIA data for May reveals a five-state pick-up in new house sales, led by NSW, compared with the figures released in April when the property market was slumbering in the lead-up to the May 18 federal election, cowed by fears of Labor’s proposed changes to negative gearing policies.

Property titan Harry Triguboff said the rate cut would help the housing market’s recovery: “Of course it will be better, this all helps. Prices are starting to come back. They have hit the bottom already and they won’t go down any more. But sales are slow because the banks are making it too hard.

“They are asking too many silly questions and making it hard for buyers. There is no point in that because if there are no buyers then the banks don’t do well.”

Prospective home buyers Matt and Alissa Skinner yesterday said the timing of the rate cut could not have been better as they look to buy a home ahead of the birth of their first child in six weeks.

Matt, 45, and Alissa, 37, recently sold their property in the hope they could lock down a long-term new home in the south Brisbane suburb of Seven Hills.

The pair were pre-approved for a loan with ING last week.

“It will help now we are down to one income. It will make things much easier. Any rate cut and ­assistance takes off that bit of extra pressure,” Ms Skinner said.

On-the-ground real estate agent Prue Holcombe of Urbane Property in Sydney’s inner-city Newtown lamented a lack of stock, saying the shortage of apartments and houses to sell meant buyers had little to choose from.

“But that makes for greater competition at auction because there is little competing stock,” Ms Holcombe said.

Melbourne real estate agent and Kay&Burton chairman Gerald Delany said interest rates were the singular biggest influence on the property market: “I think once buyers see the market movement in an active direction they will be encouraged to sell. The election together with the current sentiment and further interest rate cuts mean we will start to see a very ­active spring selling market.”

Mr Delany said this would particularly affect the sale of properties in the $2 million-$5m bracket as well as the $10m-plus market. He expected houses and apartments in Melbourne’s Stonnington market including South Yarra, Toorak, Hawthorn, Balwyn and Armidale to do well.

My Housing Market economist Andrew Wilson said the rate cut would be a positive influence.

“We always see a relationship between lower rates and higher prices and higher interest rates and lower house prices — we will certainly see that going forward,” Dr Wilson said.

AMP Capital chief economist Shane Oliver said Australian residential property had fared poorly of late, with average capital city prices down 8 per cent over the past financial year: “Signs of stabilisation have emerged, helped by the election result and rate cuts.

“Residential property has more short-term downside risk. Expect flattish prices through calendar 2020 as an upwards drift in unemployment constrains returns.”