Cash rate holds, but existing issues remain unaddressed
Chairman of Loan Market, Sam White, said the RBA’s decision today to hold the official cash rate won’t lessen concern around the Sydney market.
“I’ve long said the issue in Sydney is one of supply. Most other markets in Australia are significantly more subdued and in some cases going backwards.
“We don’t have a property price problem in Australia – what we have is a very strong market in Sydney. I think most people can agree that it is no one’s interest for large numbers of Sydney families to be excluded from homeownership. The Sydney market is strong for Sydney factors, not financial market factors,” he said.
With the cash rate sitting at an all-time low of 2 per cent, Mr White maintains that the issue of housing affordability in Sydney is one that must be addressed.
“Supply is the only solution to the house price problem – but that is a longer-term fix. In the short term, we need another measure to play the role that raising interest rates used to.
“I favour some macroprudential measures to slow the housing market as long as they are temporary and targeted,” he said.
With APRA’s attempt to limit increases in investor lending, Mr White said it’s a measure that is really only relevant to Sydney’s markets.
“Those who don’t live within 50 kilometres of the centre of Sydney – especially those who don’t live in NSW – will be wondering what all the fuss is about. Large parts of Australia, particularly in Western Australia and South Australia, need more investors.
“Typically, investors lead the market. They often enter markets where the value has been mispriced and yields represent better value. Far from wanting to restrain investors, these states want to encourage them. The APRA move doesn’t help those markets – a better solution would have been to geographically target the intervention.”