Property soars as rates stay on hold

Thursday 03 Apr 2014

Sydney's runaway property prices are unlikely to be derailed by interest rate rises any time soon, with low rates required to stimulate an otherwise sluggish economy and the Reserve Bank saying it sees inflation under control for the next two years.

As new figures show Sydney's median dwelling price surge by almost $100,000 over the past year, the RBA held interest rates on hold at a historically low 2.5 per cent.

The low interest-rate environment has fuelled the rapid growth in the housing market, prompting the RBA to warn borrowers and banks against property speculation over the past few weeks.

But RBA governor Glenn Stevens avoided repeating the warning in his statement on Tuesday. He only noted that ''dwelling prices have increased significantly over the past year'' in what economists said could be a sign the central bank would remain tolerant of the booming property market as other parts of the economy struggle to pick up the slack left by a decline in mining investment.

The stable outlook for interest rates means borrowers can look forward to near record-low mortgage lending levels for an extended period.

But with the number of prospective buyers at inspections and parties registering at auctions slowing, market watchers think the froth may already be coming out of the market.

Median dwelling prices in Sydney have soared to $630,000 last month from $545,000 in March 2013 - at least on paper, after property prices returned to record highs in March.

 

 

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- Glenda Kwek, Toby Johnstone