What’s behind the RBA’s rate cuts & Quantitative Easing Program? + Latest property data | Property Insiders [VIDEO]

November 11, 2020

What’s behind the RBA’s rate cuts & Quantitative Easing Program? + Latest property data | Property Insiders [VIDEO]

November 11, 2020
Reserve-Bank-of-Australia.jpg

Cup day is famous for rate cuts and rises and the Reserve Bank didn’t disappoint us this year making the historic decision to cut the cash rate by 0.15 per cent, slashing official rates to 0.10 per cent.

It also announced a broad-based quantitative easing program committing to purchasing $100 billion in government bonds of 5 to 10 years maturity over the next six month.

While the economic boost of this rate cut is likely to be small compared to that provided by the recent Budget, the further reduction in borrowing costs will support household and corporate finances and boost housing demand as well as keep the Australian dollar lower than would otherwise be the case.

For investors, it means low-interest rates will be with us even longer – with a rate hike unlikely until 2024 at the earliest.

To discuss the implications of this for our property markets and the economy in general, as well as to give us an update on the latest property data, I’m joined by Dr. Andrew Wilson, chief economist of My Housing Market.

What’s behind the RBA’s rate cut and Quantitative Easing Program?

It’s been another interesting week here in Australia, as well as overseas.

In Australia, the regular beginning of the month data showed us the gentle turning of the property markets as you’ve been predicting over the past weeks

And at the time we’re recording this show the result of the American election is not yet known, but that will have implications for the world economy as will the second-wave of Coronavirus infections in Europe and the USA, which is leading to lockdowns in the UK, France, Germany and in other countries.

These factors must have been part of the thinking behind the RBA’s decision this week.

Even before these overseas lockdown threats, the RBA signaled it was going to cut the cash rate, but the escalation of lockdowns overseas means global economic growth will be less and more stimulus from local sources will become more important.

The RBA will start buying up bonds issued by Australian governments.

It will spend about $5 billion a week, every week for six months until it has bought $100 billion State and Federal bonds giving them access to cheaper funds.

Watch this week’s video as Dr. Andrew Wilson explains

  • What’s behind this latest easing?
  • Will the rate cuts work?
  • Does this mean the RBA is now out of bullets?
  • The implications for our property markets

Consumer confidence

Boy And Girl Dressed As Superheroes On California Beach

The ANZ-Roy Morgan Consumer Confidence increased 0.2pts to 99.9 this week and is now 5.7pts above the 2020 weekly average of 94.2 but is still 13.6pts lower than a year ago.

Consumer Confidence has now increased for nine straight weeks and is up 9.7pts since ending August at 90.2 and at its highest for over six months since March 14/15, 2020 (100.0).

This week’s increase was driven by increases in both Melbourne and Country Victoria after the end of Melbourne’s sixteen-week lockdown last week.

There was increasing confidence about the performance of the Australian economy this week with an increasing 12% of Australians expecting ‘good times’ for the Australian economy over the next 12 months (the highest figure for this indicator for over 7 months since March 2020) while 30% (down 4ppts), expect ‘bad times’ (the lowest figure for this indicator for over a year since July 2019).

Consumer Sentiment

This week’s economic data provided by Dr. Andrew Wilson

Andrew Wilson

Watch our video as Dr. Andrew Wilson gives his commentary on the following data:

New home loans surge.

The value of finance commitments for housing rose 5.9% in September with homeowners, first home buyers and investors back in the market.

​Combine this with recent house price data, and there is little doubt the markets are on the move again

New Home Loans

New home loans for owner-occupier building surged in September, but there’s no surprise in this considering the government’s incentive program.

New Home Loans2

Building approvals for new homes also rose in September, a sign of increasing demand.
But approvals for new apartments are languishing.

New Home Build

This week’s property data provided by Dr. Andrew Wilson of My Housing Market

Andrew Wilson

Watch our video as Dr. Andrew Wilson gives his commentary on the following data:

Sydney

Auction clearance rates remained firm in Sydney last weekend.

At these levels, when close to 80% of properties put to auction sell under the hammer, price growth tends to follow.

Is this the bottom of the Sydney property market?

Sydney Weekend

And Sydney property sales remain strong, reflecting pent-up demand.

Real Time Sydney

Melbourne

With Melbourne working its way out of lockdown, more properties are being listed for sale and auctions have returned to Melbourne, even though in low but increasing numbers, and buyers are active in the market.

Melbourne Weekend

With more Melbourne properties being listed for sale by auction, it’s likely that one of Melbourne’s favourite weekend pastimes, on-site auctions, will return with a vengeance.

Melbourne Weekend2

Melbourne property sales have surged, reflecting pent-up demand.

Real Time Melbourne

Brisbane

And the Brisbane property market is performing very strongly with more sales last week than any other capital cities.

Real Time Brisbane

Newly listed homes for sale:

With consumer confidence picking up, vendors are more confident and many more homes have come on the market for sale over the last week, particularly in Victoria.

Watch our video as Dr. Andrew Wilson gives his commentary on the latest statistics.

Daily New Listing

Source: propertyupdate.com.au