RBA rate cut won’t stimulate housing market pick-up: Leanne Pilkington

Reserve Bank rate cuts no longer have any meaningful impact on housing market activity, according to Laing+Simmons general manager Leanne Pilkington, following today’s 25 basis point cash rate cut.

Swimming against the tide of industry commentary forecasting a housing market bounce in 2013, Pilkington says that while borrowers may get a final reprieve for the year from the rate cut, the Reserve Bank "no longer has the relevance or power to stimulate housing market activity as the banks are either not passing on the cuts, or passing on only a fraction of them".

“The net result is that interest rate cuts at the Reserve Bank level are not having an impact. The subdued levels of transactional activity, despite the official cash rate being at historical lows, not only emphasises the caution among buyers but also the lack of stock on the market,” said Pilkington.

“The end result of the lack of consumer confidence – and trust – in the banks is that more people are staying put, fewer first home buyers are taking the first step to ownership, and those in need of an upgrade are hesitant to make a move in the current climate.”

Laing+Simmons recorded a 30% jump in open for inspections in October over September as well as a rise in the number of auction attendees and market appraisals following the October 3 rate cut, but the rally was short lived with November numbers back on par with September.

Pilkington said spring contributed to the usual spike in activity, with the market unable to maintain the upward momentum.

She said the government needed to investigate “new avenues to stimulate activity, as cash rate adjustments are no longer cutting it and said there was a need for to incentivise the developer side of the equation “because caution is dictating the buyer side at present”.

She also called for a “reconsideration of stamp duty” calling it “the single most restrictive tax inhibiting transactional activity, one which effectively quashes a potential deposit for many buyers”.

Other market commentators said the rate cuts would have an impact.

“Two interest rate cuts this quarter (October and now December) improve the prospects of a tangible recovery emerging in 2013 for both new home building and renovations activity,” said HIA chief economist, Dr Harley Dale.

 "Lower interest rates make a vital contribution to improving conditions for the residential construction industry, but government action is the key.”

Residential developer Sekisui House, currently building the $2 billion Central Park mixed-use project in inner Sydney in partnership with Frasers Property Group and The Hermitage residential community in Sydney’s South West said the 0.25% cut would boost the property market in the coming months

“In our market, we’ve noticed a trend in higher sale volumes corresponding to previous rate cuts throughout 2012, which we believe is also buoyed by the significant State Government commitment to infrastructure in Sydney’s South West,” said Craig D’Costa, Sekisui House senior development manager at The Hermitage.

Matt Daly, general manager of residential builder Hotondo Homes, welcomed the rate cut and said it would bring the dream of building and owning your own home “a little more reachable”.