According to REIWA, property sales activity in the Perth metro increased in February 2017, up 8% from January’s figures. The top performing suburbs for Perth in February were Canning Vale, followed by Duncraig and Ellenbrook. A key driver to the increase in property sales activity in February can be attributed to continued record low interest rates and minimal movement in Perth house prices. Perth’s median house price continues to hover around the $520,000 mark.
This month, the RBA chose once again to leave the cash rate on hold at 1.5%. Despite an improvement in economic growth in the last quarter, the RBA continues to try to balance the need to manage ever increasing levels of household debt and the obligation to maintain and improve economic growth on a fiscal level. Research House, Core Logic recently suggested that while interest rates continue to remain low, it is likely that housing demand from investors and owner occupiers will remain strong.
Of concern is the fact that household debt remains at an all-time high, with minimal increases in household income and minimal growth in property value. Enter Australia’s banking regulator, APRA. According to the West Australian, APRA has issued a warning to banks that if they exceed their cap on lending growth, that the regulator will intervene to ensure that prudential lending caps are maintained. As such, major banks including the Commonwealth Bank and subsidiary, Bankwest, have announced that they will be tightening their lending policies, particularly in the investment lending sector. In addition, the Commonwealth Bank and Bankwest have also increased the interest rates on their investment loan products.
So, what does this mean for the Perth housing market? Essentially, whilst the economy is showing some improvement, and the RBA has conflicting goals which at the moment are causing it to keep the cash rate on hold, prudential measures from the banking regulator are likely to force interest rates up as lenders are required to tighten their lending policies.
If you are looking to purchase property, or currently own property, now is an important time to review your current loans to assess their suitability. Call your Launch broker today.