Market/Finance News Blog: Inflation on track and land values healthy

By the resi financial blog team, 28 October 2014

Market/Finance News Blog: Inflation on track and land values healthy

According to the Reserve Bank of Australia's (RBA) recent figures, inflation is well within the bounds of their mandate. The Consumer Price Inflation measure showed a trimmed mean quarter-on-quarter increase of 0.4 per cent, and a year-on-year change of 2.5 per cent.

Speculation is that the breathing room afforded by soft inflation figures will give the RBA the necessary conditions to maintain an accommodative financial policy with a low official cash rate.

Real Estate Institute of Australia President, Peter Bushby is positive about the effect on Australian households, and maintains that the low interest rate is exactly what the property market needs.

"With inflation under control combined with indications in some markets that housing is tempering, it's appropriate that the RBA Board maintains interest rates at their present level," Mr Bushby concluded.

In turn, this could provide good conditions for those thinking of buying land and building.

The far-reaching effect of land sales

Sales of residential land have increased across the country, especially in regional areas. According to RP Data and the Housing Industry Association, the value of residential land sales has increased by 8.4 per cent across the Australian states in the June quarter, and 10 per cent for the entire fiscal year.

The broad spread in the increase in land value points to a wide-felt recovery in the regional markets.

According to RP Data research director, Tim Lawless, the knock-on effect for the rest of the economy will be significant as household expansion and spending provides stimulus to other parts of the economy, from manufacturing to retail.

"This is the strongest result since the June quarter of 2013 which is welcome news. A rise in land sales implies a rise in detached housing construction about six months down the track which in turn provides a substantial multiplier for the Australian economy; more jobs, more building materials, home furnishings, appliances and white good sales."

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Categories: Financial Services