The rate cut that did not move the market
Three months on from the May reduction, borrowing capacity is up and transaction volumes are not.
The Reserve Bank's May reduction took the cash rate to 3.60 per cent, lifting median borrowing capacity for a dual-income household by approximately $34,000. On the standard model, that should have shown up in transaction volumes within a quarter.
It has not. Sales volumes across the combined capitals in the three months to August are 2 per cent lower than the same period last year, and listings have risen rather than fallen.
Part of the explanation is the serviceability buffer, which continues to assess borrowers at three percentage points above the offered rate. At current pricing that means an assessment rate near 9 per cent, which is where the binding constraint actually sits for most applicants.
The other part is deposit formation. Median time to accumulate a 20 per cent deposit on a capital city dwelling remains above nine years, and a rate cut does nothing to shorten it.
Sources
Related coverage
Investors return as rental yields improve
Gross yields above 4 per cent in three capitals, combined with a stable cash rate, have brought investors back into a market they largely vacated in 2023.
The first home buyer numbers do not say what you think
Opinion: the standard reading of first home buyer data confuses a compositional shift with an affordability improvement.
Australia's apartment shortage is becoming a construction problem
Builders are declining work that would have been taken without hesitation five years ago. Fixed-price contracts, insolvency risk and a thin subcontractor market are converting a planning problem into a delivery problem.
The suburbs where apartments now outperform houses
A data analysis of 1,240 suburbs identifies where the house-apartment relationship has inverted, and what those markets have in common.