Property market information: Inflation rate to sustain housing industry growth

By the resi financial blog team, 28 April 2014

Property and inflation in Australia

Recent data from the Australian Bureau of Statistics (ABS) could lead to positive conditions for home buyers looking to lock in the best fixed home loan rates seen in some time.

The ABS reported on April 23 that the headline inflation rate for the March 2014 quarter was 2.9 per cent. This remains just within the boundaries of the Reserve Bank of Australia's (RBA) target range of 2 to 3 per cent.

However, when looking at the trimmed mean (2.6 per cent) and weighted median (2.7 per cent), it's clear that the inflation rate is even more safely within this range.

In short, such inflation activity is expected to result in the official cash rate remaining unchanged and interest rates to stay at record lows.

"These figures auger well for continued recovery in Australia's residential building industry," said Housing Industry Association Senior Economist Shane Garrett in an April 23 media release.

"There were fears that inflation would break the 3 per cent threshold during March, but today's figures will have soothed these worries somewhat. The latest inflation data will support the RBA's position of maintaining interest rates at record low levels."

This favourable inflation rate could drop further, according to Mr Garrett. Citing "continued weakness in the labour market" and the "resurgence of the dollar over recent month", Mr Garrett said that inflation could decline in coming quarters. As long as the rate stays within the range outlined by the RBA, however, it is likely the official cash rate will stay put for quite some time.

Continued access to affordable home financing will most likely result in continued strength in the Australian housing market, which has experienced high demand and steadily growing home prices due to the low interest rates on offer. 

Categories: Home Loans