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{{propApi.successMessage}} {{region}} Change locationRate cuts will stimulate home building
Rate cuts will stimulate home building
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The RBA had its May Monetary Policy Board meeting today where it sets the target for its benchmark cash rate and releases its new forecasts.
“The volume of home building has fallen to its lowest volume in more than a decade following the rise in the cash rate from April 2022,” added Mr Devitt.
“Today’s cut, along with an expectation of further cuts in 2025, will improve market conditions and confidence and continue to support an increase in the volume of homes commencing construction.
“Even with further rate cuts, the volume of new homes commencing construction will fall well short of the governments goal of 1.2 million new homes.
“Structural reforms to the way in which new homes are taxed, approved, financed and constructed are required to increase the supply of homes to match demand and address the housing shortage.
“The first rate cut this cycle was delivered in February, following data showing that trimmed mean inflation – the RBA’s preferred measure of inflation – fell to 3.2 per cent in 2024, below their own forecasts.
“Now with trimmed mean inflation falling to 2.9 per cent in the 12 months to March, returning to the 2-3 per cent target band for the first time since 2021, the RBA was comfortable delivering its second rate cut, bringing the cash rate to 3.85 per cent.
“If the banks pass on today’s decision to their own mortgage rates, these two cuts will be very helpful in getting more aspiring home buyers across the line and into their own home.
“Several states, like Western Australia, Queensland and South Australia, are already seeing improving home building volumes on the ground on the back of strong population growth, tight labour markets and recovering household incomes.
“Reduced mortgage costs will provide an added boost and potentially also bring some of the lagging states back to the table.
“As it stands, Australia is set to build less than 1 million new homes over the government’s target five-year period, almost 20 per cent short of national housing targets and a long way from addressing the national housing crisis,” concluded Mr Devitt
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