The Reserve Bank is jeopardising a stable property market, according to REIA president Kareena Ballard.
REIA believes the RBA is overreacting to a buoyant property market.
“It is disappointing that the Reserve Bank has chosen to raise interest rates again, so soon after the rise last month,” Ballarad says. “Property market forces were already at work in October prior to the interest rate rise of 5 November. The Reserve Bank would have done better to wait until the December quarter housing market data was available before going ahead with the interest rate rise announced today,” she says. Figures for the June and September quarters 2003 show that the increase in house prices had already begun to slow prior to the Reserve Bank decision to lift interest rates. Anecdotal evidence from agents suggests that the November interest rate rise had created a correction in the market which is likely to be sustained through December. “The property market plays a significant role in the domestic economy and over-reaction may create unwanted major implications for consumer and business confidence,” says Mrs Ballard. “The strength of the housing market is of concern to all stakeholders, but raising interest rates will only exacerbate the problem of housing affordability. As a result of the November and December rate increases, homebuyers with an average variable rate loan of $194,811 over 25 years are “The REIA calls upon the Reserve Bank to exercise some caution and leadership in analysing the market before prescribing any further remedies. This cautious approach would be welcomed particularly by first homebuyers.”
now repaying $1385.60 per month, or $61.70 per month more than they were in October.
