Poor housing figures; RBA leaves rates on hold

The Reserve Bank has surprised the industry by choosing to leave the official cash rate on hold at 4.5 per cent.

Despite widespread speculation that the RBA would tighten monetary policy in a bid to stop inflationary pressure from seeping into the wider economy, a spate of less than impressive housing data forced the board to leave rates unchanged.

House prices dropped 0.2 per cent in August, while building approvals sank 4.7 per cent the same month. Today’s Australian Industry Group/Commonwealth Bank Australian performance of services Index slipped 1.9 points in September to 45.6 – the fifth month of contraction, amid a softer retail demand.

For investors, the prospect of higher interest rates is not all bad.  Higher interest rates are likely to create additional demand from renters in what is already a very tight rental market.  We are already seeing the first signs of higher weekly rents and with more prospective buyers choosing to rent rather than own the upwards pressure on rents is likely to increase yields for investors further.

I think this pause will be short lived, good news for home owners



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