Rates hold following changes for Investors

SYDNEY and Melbourne property prices are likely to be monitored closely following the Reserve Bank of Australia’s decision today to keep interest rates unchanged, according to the nation’s leading real estate network LJ Hooker.

LJ Hooker CEO, Grant Harrod, said while a rate cut would benefit other capital cities such as Perth, Adelaide, Hobart and Darwin, changes to investor lending could help to cool down east coast prices.

“I just don’t think there is enough compelling reasons for a reduction whilst it would be favourable for markets outside of Sydney,” he said.

“A rise at this stage is also not justified with latest economic figures and with consumer sentiment being a bit depressed, I think the safe haven for the RBA is to just stay where they are at.”

Mr Harrod has not ruled out a rate cut by the end of the year, but believes any reduction now would be counter productive to the tightening of investment loans.

He sees the changes implemented by the main banks, as a positive for the market as it will reduce any possible future risk should there be any adverse economic event.

In addition, he believes the banks are lowering their property valuations in an attempt to contain prices, which will also deter some investors and ensure people do not over commit. “The biggest positive of increasing investor lending rates is that they have done this to de-risk the market, it will make it more stable from speculative investors,” Mr Harrod said.

“Moving forward it will make the buying pool more stable and less risky if there is any correction, so the effects on the property market and banking are not so great.”

Sydney is expected to be protected from any `housing bubble’ due to its significant shortage of properties, strong employment opportunity and growing population.

Listings in the Harbour City remain at historical lows as home owners wait to buy before selling, which has kept pressure on prices during the winter selling season. Most in demand, and increasingly rare, are houses in the sub $900,000 price bracket.

LJ Hooker National Research Manager, Mathew Tiller, believes an improving US economy and a softer Australian dollar are also having a positive impact on the housing market and acting like an interest rate cut.

“It is helping exporters and that side of the economy which has been sluggish and so while the dollar remains soft and falling it will have a stimulatory effect on the market.” he said.