The Reserve Bank of Australia yesterday decided to keep the cash rate target on hold at 4.35 per cent, but left the door open for another hike in coming months.
With some economists forecasting little chance of a cut in the cash rate before next year, the housing market remains vulnerable, according to real estate investment company Ekam Capital.
The potential for a rates rise and increasing unemployment in the second half of this year some capital city markets worse than others.
“We’re already seeing slowing growth in house prices in capital cities, primarily in Sydney and in Melbourne, as high levels of debt and the cost of living weigh on households,” chief strategist Robert Baharian said.
“We believe property prices in Brisbane and Perth will continue to hold at relatively high levels given the relative value in those cities, with a growing pool and share of the investor market looking outside of Melbourne to buy property.”
The RBA continues to watch Australia’s stubbornly high inflation rate of 3.6 per cent recorded for the 12 months to April.
Governor Michele Bullock said yesterday the central bank wasn’t ruling anything in or out, and that the economic picture was proving difficult to read.
Baharian said the longer interest rates are kept on hold, the longer house buyers will feel the impact until inflation falls to the RBA target of 2 per cent to 3 per cent.
“We think rates might remain on hold at least to September, and possibly right through to April 2025 before the consumer sees any relief,” he said.
“We may have won the battle, but the war on inflation is not quite in the bag – yet.”
Australian city world’s second most unaffordable
The current interest rate has been unchanged since November 2023.
The financial market is still expecting the RBA’s next move to be a cut rather than an increase.