The Reserve Bank of Australia is not concerned about the housing market; not at all. This message is concealed in the decision of the governor of the RBA to keep interest rates on hold this week. The call from the central bank should not enter in order to stop the price drop – yet, nevertheless, nevertheless.
"Simplicity" is the word they use to describe what the housing market is doing. Do not collapse, not crumble, nor even slip. "Conditions … continued to make it easier," the RBA said on Tuesday, announcing that it would leave official interest rates on hold.
The release sounds nice. You do not have to panic when things get easier. In fact, if things make it easier, it means that they were too heavy before. The RBA wants to believe in a fall in house prices (we will use the neutral word "drop" because prices were earlier and now lower) it's completely fine.
The poor are still so relaxed when many other people began to consider the worst scenarios? Do we all need to cool?
The RBA uses the word "easing" to refer to the two largest housing markets in Australia, Sydney and Melbourne, where prices are reversed faster every month, and bidding rates fell well below 50%.
As you can see in the next chart, sales bidding rates this year are below last year, even in cities like Adelaide where prices are kept.
Louis Christopher, an analyst for a residential real estate research firm, SKM Research is not relaxed about such prices. They think they could get us to the living space.
Auction approval rates for these markets in Sydney and Melbourne are effectively converted to a price drop of 1.5% to 3% BY QUART. This is the territory of the accidents if this situation continues.
– Louis Christopher (@ LouiChristopher) November 3, 2018
HOW DO I RECOMMEND If there is a scam?
So RBA works well. But what could it actually do, even if it was panic? Would they actually lower interest rates from where they are now – record below 1.5 percent? Even if they did, would banks pass these interest rates on borrowers?
My personal opinion is that if the real estate market starts to fall quickly enough to jeopardize the economy, RBA will reduce. What else can I do? Their job is that the economy will start inflation as well, ranging from 2 to 3 percent. If the house prices really were in a free fall, the job would be very difficult.
So, if the price of property decreases, the rate reduction would be their best move. But then they face the risk that the banks do not give it.
Large Australian banks recently had rising costs and they could decide that the pocket part of any cut would restore its profit margin. This means that the RBA should be decisive.
Given that the RBA will not deal with cutting, unless it is really necessary, a reduction in the super-size rate of 0.5 percentage points may be more likely than a simple reduction of 0.25 percentage points.
Would such a big cutting contribute to the feeling of panic? This is part of the dilemma that the RBA can face if the price of the asset continues to fall. They definitely do not want to panic.
WHY YOU HAVE
Although RBA acted without any rewards in the housing market, it allowed new concern when it talked about consumer spending.
Here's what he said: "One continuation of uncertainty is the look for household spending. Household income growth remains low, debt levels are high and some property prices have fallen."
These property prices that they are talking about? Well, the stock market recently fell. But the Aussi have a way to get more money in the dwelling. If the population falls, we feel less rich and spend less.
Retail sales in Australia are suffering, and wage growth is absolutely unfortunate. The last thing our economy needs is even more things that diminish consumer spending.
The housing market is not isolated from Australia. This is a problem with the cohort of people who are hoping for a really large decline in the population. All right, prices could be much less, but there is a risk – you may not have a job to get a mortgage.
But even a modest fall in house prices could damage employment in construction. Our construction boom means that the proportion of Aussie working in construction is approaching 10 percent, the highest record, as shown in the next chart.
This construction boom is mainly related to the construction of apartments in Melbourne, Brisbane and Sydney, because real estate prices have made profitable business. As housing prices fall, the chances of falling profit and building can be cooled.
We already see that some large-scale residential projects have been canceled. The Singapore programmer went a long way from the great development of a residential tower to Collins St, Melbourne, and recently sold it from the site. This project would send jobs to many people. If other planned events are abolished, employment in construction may fall.
If the share of Australians working in construction falls to the level of the nineties, that would be a lot of people looking for work in other industries.
That's why we all have to hope that the RBA has understood everything and that there really is no reason to panic on the prices of apartments. Because the alternative is too horrible to think.