While some soon-to-be first home owners may have groaned when their hopes of an interest rate cut this month were dashed by the RBA’s Governor Glenn Stevens, many in the finance community noted the decision to hold our interest rates steady at 3% as a step in the right direction, and an indication of stability. Today, C&G write on the positive stance taken by the RBA in anticipation of a strong market for 2013.

2012 was a year that involved watching and waiting for many aspirant and current property-owners. Who would move first? Market expectations or market forces? The RBA observed the economy carefully last year, responding with a series of interest rate drops from 4.25% down to our current (historic) low of 3%. The Australian dollar remains high – something unlikely to change until our northern neighbours in America and Europe fully address the economic challenges they face. That said, both Europe and the US are working through their issues – America in particular bringing down deficits effectively. China is beginning to re-invest in Australian iron, with exports strong for the last quarter paired with a 6% increase in price per tonne. Inflation is controlled at 2-3% (acceptably within forecast) – the RBA’s major concern is in relation to employment. Australia’s wages continue to be high, making our exports far from competitive and restricting the growth of small business growth. It’s not all bad news though – happily, residential investments have grown (particularly for units) in capital cities across the board. The RBA’s ‘wait and see’ approach for February should be interpreted as a sign of confidence. Although the economy has improved, the RBA will wait to see the full ‘trickle down’ effect of 2012’s rate cuts before considering any further discounts to the cash rate.

More locally, the bayside areas of Melbourne are enjoying strong consumer demand. With the property market far from over-supplied, Chisholm & Gamon are anticipating a busy and successful tail end to summer real estate sales. Many economists suggest a further two rate cuts over 2013, whilst UBS predict a rate cut in March (touting a 62% chance of one, in fact!) Regardless of further cuts, the home buyer has returned to market in 2013 hungry for the opportunity to purchase before rates begin their inexorable climb upwards, locking them out of blue chip suburbs which grow in value annually. Remember – it’s not about timing the market – rather, investment successfully centers around purchasing intelligently and spending time in the market.