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Economy slows, even as house prices boom and interest rates stay the same

Thursday, 4th Sep 2014
Categories: Finance, Newsletter

The RBA decided to leave the cash rate on hold for the thirteenth consecutive month, as widely expected by economic forecasters. The Australian Financial Review stated this morning that the “annual economic growth probably slowed to 3 per cent in the June quarter from 3.5 per cent in the previous quarter, according to survey of economists. The Reserve bank of Australia board acknowledged on Tuesday the property market is rising again but declined to bring forward expected hikes in official interest rates because of weaker GDP figures”

The increase in property prices was led by Sydney and Melbourne where capital city house prices rose 4.2 per cent in the three months to the end of August, which made it one of the strongest winter sale periods since 2007. According to Cameron McEvoy from RP Data. “Influential factors such as limited land supply in high demand capital city suburbs (both inner, middle, and outer ring ones), current home owners blocking higher-density construction within city limits areas, and a low interest-rate environment are all stimulating a buying frenzy among locals and foreign investors alike.”.