RBA has room for more rate cuts

Yesterday, research from RP Data found dwelling values contracted by 0.5 per cent over the month of April after posting a solid 2.8 per cent gain over the first three months of 2013.

According to RP Data, this is the first monthly decline its Home Value Index has recorded since last December.

Speaking to The Adviser, RP Data’s Cameron Kusher said while the April results represent more of a stumble than a renewed trend in value falls, it does open the door for the Reserve Bank to cut rates if it wishes.

“I think there is a lot of scope for the RBA to cut rates at the moment,” Mr Kusher said.

“Obviously there is a lot of concern about the mining investment cliff and the Reserve Bank has said they would like to see the construction sector pick up the slack. There has been a little bit of improvement in housing construction, with the HIA indicating that new house starts were up 4.4 per cent in March. That said, there is no sign yet of a sustainable recovery.

“On top of that, we saw unemployment rise a little this month and if that continues, we will definitely see the RBA cut rates.”

Mr Kusher added, however, that the economy - particularly the Australian property market - is still in pretty good shape.

“When viewed in line with other metrics such as auction clearance rates, private treaty indicators and some improvement in housing finance demand, it is likely that the negative April result will be a blip along the path to recovery,” he said.

“We weren’t expecting that the high rate of growth evidenced over the first three months of the year would be sustained into April. A more measured pace of growth is a much more realistic outcome for the Australian housing market, especially considering that the first quarter is typically the strongest for value growth.”