RBA holds the cash rate – What does it mean?

The Reserve Bank of Australia's (RBA) recent decision to maintain the cash rate at 4.1% has been met with relief by many, but it does not necessarily indicate an end to the rate hiking cycle. The RBA is basing its decision on a mix of key data sets, leaving the possibility of another rate hike in the future still on the table.

On one hand, the decision to hold rates is supported by a lower-than-expected inflation outcome for the June quarter, with headline inflation at 0.8%, the lowest quarterly change since Q3 2021. Additionally, retail sales declined by 0.8% in June, and economic conditions weakened with Q1 GDP growth at just 0.2%. The RBA had expressed concerns about asset value growth in the housing market, but those worries may have eased as price growth has decelerated in the last two months.

On the other hand, there are persistent tight labour market conditions, with unemployment at a low 3.5% and strong jobs growth. Wages are rising well above the decade average, and services inflation remains "sticky," with the highest annual growth rate since 2001.

While rates remained unchanged this month, it does not rule out the possibility of future rate hikes. The RBA's economic perspectives will be further outlined in the quarterly Statement on Monetary Policy to be published on Friday. Given the opposing trends mentioned, another rate hike cannot be ruled out.

There is considerable uncertainty ahead, as economists have varied views on the rate hiking cycle. Some believe that the peak has already been reached, while others anticipate one more hike in the coming months. Some even predict two more rate hikes due to tight labour market conditions potentially leading to wage growth and prolonged inflation.

The RBA itself has left the door open for rate hikes, stating that further tightening of monetary policy may be necessary to ensure inflation returns to the target range within a reasonable timeframe, depending on inflation and labor market outcomes.

For the housing sector, the decision to hold interest rates for the past two months is positive news. The growing expectation that interest rates have either peaked or are close to a peak is likely to boost consumer sentiment, which has been at recession-like lows for nine months. Consumer confidence and housing activity are closely linked, and an improvement in sentiment is likely to lead to increased home sales and activity in the housing market.

Market Insights - Lower North Shore and the Eastern Suburbs (last 60 days)

Based on the market insights for the last 60 days, several key trends can be observed in the suburbs of Mosman,?Cremorne, Paddington, Bondi and Vaucluse. Mosman has experienced a significant number of new sale listings, totaling 365, with properties spending an average of 27.12 days on the market. The suburb has also seen a low average vendor discount of 0.83%, indicating strong demand and potential for favorable selling prices. However, there have been 154 recently advised sales and 502 total rental listings, suggesting a competitive market for sellers and potential opportunities for renters.

Cremorne, Paddington, and Bondi have also witnessed a healthy number of new sale listings, with properties spending relatively fewer days on the market compared to Mosman. Additionally, Cremorne and Paddington have a lower average vendor discount, indicating a robust seller's market. Bondi stands out with a negative average vendor discount of -2.87%, potentially signaling a highly competitive market for buyers.

On the other hand, Vaucluse shows fewer new sale listings, but properties tend to stay on the market for a longer period (56 days). The suburb has a higher average vendor discount of 1.82%, which may indicate more negotiation room for potential buyers. The data suggests varying market conditions across these suburbs, providing valuable insights for buyers, sellers, and renters in the current real estate landscape.

Should you have any further questions about what's happening in the Lower North Shore or the Eastern Suburbs, please do not hesitate to reach out.