The Reserve Bank dropped the official interest rate to 0.75% and the property industry says, thanks RBA, you’re the best.
One of the biggest issues that conveyancers and real estate agents are currently facing is a lack of supply of properties on the market especially in Sydney and Melbourne. This is suppressing sales volumes.
Enter the Reserve Bank of Australia to fix this problem. Lower interest rates mean higher property prices, enticing more properties onto the market.
As far as we know, the RBA did not lower interest rates yet again to become the best friend of conveyancers and real estate agents. Higher property prices and sales volumes are by-products of something else it is trying to achieve.
Lowering the official interest rate to its current level will have intended and unintended consequences. An over-stimulated property market is not something intended or desired.
Trying to avert a disaster that may never happen
Since 2014 Australia’s population increased by around 1.9 million people. Over this period the number of employed people increased by 1.4 million. That is a great result – a population boom and an employment boom together.
The unemployment rate peaked in 2014 at 6.4%. It fell to below 5% early this year and has been creeping up since then to be around 5.3%. Is this what triggered the RBA, after two years of doing nothing, to dramatically jump onto centre stage? Unlikely. The unemployment rate has only nudged up from a very low level.
It’s the global trade wars. Lower interest rates and associated currency devaluation are the RBA’s insurance policy against potential damage from the global economic powers and their trade wars.
As a result of all of this, the property sector has found a new BFF.