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Rate stability to keep property prices at bay: Domain

rba    rba
Reporter 4 minute read

A rapid downward or upward spiral in dwelling values is unlikely in the coming decade, with minimal interest rate movements expected, one economist has observed.

According to Domain Research economist Trent Wiltshire, Australia’s housing market is unlikely to experience the same levels of price growth in the 2020s relative to the previous decade.

Mr Wiltshire noted that monetary policy stability would help contain property prices, with the economist pointing to the Reserve Bank of Australia’s (RBA) expectation of an extended period of low interest rates.  

“Interest rates are likely to remain at very low levels in the 2020s, [so] it’s unlikely that there will be a property price correction caused by rapidly rising interest rates,” he said.


Mr Wiltshire added that with the cash rate nearing zero, the RBA has little room to move to stimulate the market and accelerate property price growth.  

“[As] rates can’t fall much further, they’re unlikely to be a major cause of higher prices over the next decade, as they were in recent decades,” he continued.

Moreover, the Domain economist noted that global factors influencing interest rate cuts across the world over the past decade would continue in the years to come.

“The decline in interest rates in recent decades was a global phenomenon. Interest rates were pushed down by an ageing population, strong economic growth in Asia, high debt levels and lower rates of potential economic growth,” he said.

“These causes of low rates will likely persist into the 2020s, meaning global interest rates will remain low in the next decade.”


However, Mr Wiltshire said he is expecting monetary policy stimulus in the near term, which he said would place further downward pressure on mortgage rates. 

“In the short term, it’s likely the RBA will cut the cash rate further. If unemployment remains elevated, the RBA may implement unconventional monetary policy to push borrowing rates even lower,” he said.

“If this occurs, home loan rates will be well below 3 per cent by the early 2020s, with some borrowers paying close to 2 per cent.”

According to analysts, the RBA’s rate cuts in 2019 helped trigger a rebound in the Australian housing market.

The latest data from property research group CoreLogic has revealed that national home values increased by 4 per cent in the three months ending December 2019, driven by Sydney and Melbourne, where values increased by 6.2 per cent and 6.1 per cent, respectively, over the same period.

[Related: Aussies’ intentions to buy property hit record highs]

Rate stability to keep property prices at bay: Domain
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