Housing market grows but structural issues “persist”: RBA April meeting minutes

RBA board members noted at their April meeting that Australia’s housing markets continued to improve.

Its April meeting minutes noted house prices increased again over March, to be 4.25% above their mid-2012 trough.

The board also noted that auction clearance rates had moved higher and there were signs of somewhat stronger growth in housing loan approvals.

The central bank’s liaison with home builders suggested that demand for new housing had been a little more positive of late, with a rise in activity reported in most capital cities.

“Over the past few months, housing loan approvals had picked up for both owner-occupiers and investors, and stronger conditions in the established housing market more generally were expected to support moderate growth of dwelling investment this year,” the minutes said.

“Overall, recent data suggested that interest-sensitive parts of the economy were responding to the historically low levels of lending rates and it remained likely that this had further to run.

“At the same time, the factors weighing on the economy – including the high exchange rate, the waning growth of mining investment, and fiscal consolidation – were likely to persist.

“The key issues were what the balance of these factors would turn out to be.

“With growth forecast to be a little below trend in 2013, and inflation close to target, members judged that it was appropriate for the stance of policy to be accommodative.

“The outlook for inflation, as currently assessed, would provide scope for further easing should that be necessary to support demand.

“At this meeting, the board’s judgement remained that, on the information currently to hand, the most prudent course was to hold rates steady and to continue to assess developments over the period ahead.”

The board decided to leave the cash rate unchanged at 3%.

Members were also updated on the funding composition of Australian banks, with deposits rising further as a share of total funding, despite being more expensive than comparable wholesale funding sources.

“Average interest rates on outstanding housing and business loans had been largely unchanged since the end of February.

“In the money market, current pricing implied a very small expectation of an easing in monetary policy at the current meeting, and less than one 25 basis point easing priced in by the end of the year,” the minutes noted.

This article first appeared on Property Observer.

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