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Cash rate appropriate for stabilising market

By Louise Morrin

What the rising sun is to the day, the Reserve Bank of Australia's (RBA) cash rate decision is to the month. Each RBA announcement is not just a signal that we're definitely in a new 30-day period, it also gives us a hint as to what's happening in the real estate market as a whole.

For example, the RBA's decision to hold the cash rate at 2 per cent for the fourth month in a row is a clear sign that the Sydney property market is adjusting to a more sustainable pace. Anyone who already owns or wants to buy property in Carlton and nearby areas will be happy to hear this, as the last year or so has featured no shortage of doomsday predictions about the market.

"Clearance rates are beginning to come off and prices are starting to steady," said Real Estate Institute of New South Wales President Malcolm Gunning. 

"The public are listening to the Reserve Bank Governor and the APRA recommendations, which have seen an increase to deposits for investors, higher interest rates and affordability tests, are filtering through."

CoreLogic RP Data head of research Tim Lawless noted that the annual rate of investment credit fell from 11.1 per cent to 10.8 per cent in July, which would have weighed on the minds of the RBA board members. 

"The slower month of housing data may indicate that the housing boom in Sydney and Melbourne is starting to slow and investment lending is starting to moderate in line with APRA guidelines," Mr Lawless said. 

The key takeaway here is stability. If the market continues to moderate, anyone who owns real estate in Beverly Park, Allawah and neighbouring suburbs can be more confident that their property will see sustainable growth, and won't suffer a rapid correction in value. 

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