Sydney price recovery could be just one or two cash rate cuts away, according to Property Observer editor Jonathan Chancellor. “That’s a real possibility based on the latest research of the RBA,” he says.
Their researchers found falling interest rates was the chief catalyst behind the surge in prices between 2012 and 2017 in Sydney and Melbourne. “We find that low-interest rates explain much of the rapid growth in housing prices and construction,” RBA economist Trent Saunders and RBA senior research manager Peter Tulip noted.
They found the building boom would not have been as pronounced were it not for the lower borrowing costs. Another demand factor, high immigration, helped explain the tight housing market and rapid growth in rents.
“The model estimates that the reduction in real interest rates (actual interest rates, less inflation) accounts for most of the boom in dwelling prices and a large part of the boom in dwelling investment,” said the researchers in their 35-page report.