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RBA keeps interest rates at record low of 0.1% as housing prices hit record highs

The reserve bank has continued to hold interest rates at a record low of 0.1% as house prices across Australia keep rising.

The national housing market rose 2.2% in May, according to the latest data from CoreLogic, following on from a 1.8% rise in April and a 32-year record rise in March of 2.8%.

In Sydney prices rose 3% in May alone, and prices are now up 9.5% in only the past three months (March-May).

They rose 8.5% in the first three months of 2021 – the largest quarterly rise since records began. The median house price in Sydney is now $970,355.

Prices have reached record highs even though borders have been closed for more than a year and immigration halted, with the boom fuelled largely by Australian buyers with improved savings and low interest rates.

Tim Lawless, the research director of CoreLogic, said housing values were up “across every capital city over the month, with both house and unit values lifting across the board”.

He said soaring prices were due to “the combination of improving economic conditions and low interest rates”.

“At the same time, advertised supply remains well below average,” he said. “This imbalance between demand and supply is continuing to create urgency amongst buyers, contributing to the upwards pressure on housing prices.”


According to CoreLogic, the number of homes listed for sale nationally is 24% below the five-year average.

And even as supply picks up, continuing high demand means that sales still exceed supply.

“The sales-to-new listings ratio remains around 1.1, meaning for every new listing there is more than one sale occurring,” Lawless said. “This rapid rate of absorption is keeping advertised inventory levels extremely low, despite the rise in new listings. As a consequence, vendors remain in a strong selling position while buyers have a weak position at the negotiation table.”

Prices rose 3.2% in Hobart over the past month, 3% in Sydney, 2.7% in Darwin, 2% in Brisbane, 1.9% in Adelaide, 1.8% in Melbourne and 1.7% in Canberra,

The combined capital city prices rose 2.3%. Prices in combined regional areas rose 2%. Out of 334 subregions analysed by Corelogic, 97% recorded a house price rise.

“Such a synchronised upswing is an absolute rarity across Australia’s diverse array of housing markets,” Lawless said.

The CoreLogic report also found that “worsening affordability pressures are likely to impact first homebuyers more than other segments of the market” and “there are already signs that first homebuyer demand is pulling back”.

“Investors, on the other hand, are stepping up their activity across the housing market, motivated by prospects for continued capital gain and low interest rates,” CoreLogic said.

Over the past year, house prices have risen 20% in Canberra, 16.3% in Adelaide, 15.1% in Brisbane, 11.2% in Sydney, and 5% in Melbourne.

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‘Insane’ Queensland penthouse for sale with 23 car spaces and its own nightclub

Queensland penthouse

The apartment is designed to entertain with a nightclub, a commercial kitchen for caterers, its own cinema and 23 parking spaces reserved for its guests.

A plush Queensland party penthouse is so unique that its selling agents have no idea how much money it will go for.

The apartment, which spans the highest two floors of a one-year-old apartment block in the Brisbane suburb of Cleveland, has 23 garage spaces all to itself and its very own nightclub.

This 1250 square metre property — a size which is “crazy” for an apartment — is designed to entertain, with its entire second floor devoted to hosting guests.

As well as a private nightclub replete with its own dance floor and disco lighting, the prestige property has four living rooms, a cinema, six bedrooms all with their own ensuite bathrooms and a spa that can fit six people at once.

The place also has two kitchens, one of which is suitable for a professional chef to cater to events.

It went up for sale five days ago and the realtors have refused to give any indication of price.

“There’s nothing like it in the country, it’s just insane to be honest,” selling agent Emil Juresic from NGU Real Estate told

“It’s very hard for us to come up with the number because there’s nothing like it (but) it’s going to break some major records.”

Some offers have already exceeded $15 million, according to inside sources.

 Queensland penthouse

The cinema room.

Although the two-storey top floor apartment was only listed for sale five days ago, interest has already “exploded”.

Selling agents made a viral Facebook post and the website listing has been viewed nearly 10,000 times since it went live.

How many of them will be able to pay for the luxury apartment is entirely another question, according to Mr Juresic.

“We don’t need 1,600 buyers, we just need one right buyer,” he said.

He’s already arranging virtual inspections for Melbourne and Sydney people interested, as well as some international interest from China. A few local buyers have also shown interest.

Potential buyers have already offered around $15 million for the property, 9News reported.

Queensland penthouse

The balcony with water views. 

Queensland penthouse

The stairs leading to the second floor.

Despite its party vibe, the apartment is apparently owned by a large family.

As well as water views, it also has an open wood fire in the bar area, six gas fireplaces in total and four of its six bathrooms come with stone baths

For an idea of its opulence, Mr Juresic said the family spent $180,000 just on installing bathroom taps.

“There is no penthouse like this in Queensland, the state hasn’t seen anything like this ever,” he added.

Queensland penthouse

It comes with six fireplaces.

Queensland penthouse

The apartment went up for sale last week.

Although the owners are willing to wait for the right price, he doesn’t think the wait will be long as the property market is scorching hot.

NGU Real Estate sold $103 million worth of real estate last month, with the average property staying on the market for less than a week.

Many of those are being bought sight unseen, Mr Juresic also noted.

Queensland penthouse

The library.

Queensland penthouse

I has six bathrooms with three stone baths in them.

It’s part of a growing trend spurred by the Covid-19 pandemic which has seen the appetite for super-prime apartments grow eight fold.

A report released last week by property consultancy firm Knight Frank found that apartments selling for more than $10 million in Sydney and Melbourne or $7 million plus across Brisbane, Perth and the Gold Coast are on the rise.

Purchases of plush apartments have been turbocharged by the pandemic, especially in the past six months.

There was only an average of 8.7 prestige apartment sales transactions per year from 2011 to 2020, compared to 67 purchases so far in this year alone.

Queensland penthouse

The apartment is expected to go for millions.

The report’s authors have attributed the booming prestige apartment industry to three main reasons.

Firstly, Australians want low-maintenance homes but still with a lot of space, described as “house-like proportions for entertaining”. A penthouse, or at least a very large and luxurious apartment, meets this criteria.

On top of that, those seeking a luxury residence want one that can be easily locked-up and cared for when they jet off for long periods of international travel again next year.

The final reason for the sudden boom was holidays. Australians are increasingly buying a “co-primary home”, where the second (holiday) home is almost equal in every way to their main residence, especially in terms of comfort.

As demand has increased, so have prices. Luxury apartment prices in high-rise projects have risen more than 30 per cent across the major cities since June 2015, the Knight Frank research found.


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Risky Excessive Borrowing Cause for Concern: RBA

The Reserve Bank of Australia has identified risky excessive borrowing as an ongoing problem for lending institutions and the broader economy in its Financial Stability Review.

The RBA’s October financial stability review was delivered in the wake of the Australian Prudential Regulation Authority announcement of an increased loan serviceability buffer to counteract growing concern over high debt loans and financial risk.

But overall Australia’s economy was resilient.

According to the central bank’s report, “low interest rates have contributed to high prices for financial assets and housing” which has led to higher borrowing.

“With interest rates expected to remain low, investors have been taking on more risk to seek higher returns,” the report stated.

“In Australia, and some other countries, there have been large increases in housing prices and an acceleration in borrowing.

“Vulnerabilities can increase if housing market strength turns to exuberance with borrowers taking on greater risk given expectations of further price rises and banks potentially easing lending standards.”

The RBA reported that a significantly lower number of borrowers had applied for loan repayment deferrals this year, in contrast to last year, and that policy measures had supported households’ and businesses’ balance sheets.

But it warned that financial stress was still being experienced in highly impacted industries including tourism, and those living in areas under the most “stringent” lockdowns.

Share of high debt-to-income ratio loans to total


^Source: BIS Oxford Economics, APRA 

CBA Economics head of Australian economics Gareth Aird said the report painted a picture of a central bank that was paying close attention to the housing market and rising debt levels.

“The RBA has expressed concerns around the overall level of household indebtedness for some time … without doubt those concerns have been notched up more recently given the acceleration in borrowing,” Aird said.

“But if credit growth remains stronger than income over coming months, pressure is likely to intensify for APRA to make some more policy changes … it is crystal clear that the RBA will seek to have any concerns around an overheated housing market addressed through more macroprudential policies from APRA.

“Rapidly rising home prices or an acceleration in household debt because of record low rates will not directly feed into the RBA’s decision making around when they commence normalising rates.”

Capital Economics economist Marcel Thieliant said the RBA’s stance had been “dovish” compared to New Zealand’s central bank.

“Both countries are witnessing very strong house price growth and Australia’s housing regulator this week lifted the serviceability buffer banks need to use to assess a borrower’s capacity to repay a mortgage from 2.5 per cent to 3 per cent,” he said.

“APRA described the change as ‘fairly modest’ and we still expect it to impose debt-to-income restrictions next year.”

Thieliant said the RBA was heavily focused on underlying measures of inflation and wage growth rather than headline inflation, with forecasts remaining firm for a flat RBA interest rate through to 2023.

BIS Oxford Economics economist Maree Kilroy said she believed APRA would undertake further macro-prudential measures if necessary.

“The regulator plans to publish an information paper on its framework for the use of macroprudential tools at some point over the coming months,” Kilroy said.

“This seems likely to represent a marker for further intervention, especially if the pace of price growth isn’t tamed in [the fourth quarter] and lending to marginal borrowers does not ease.”

Kilroy said APRA could lift mortgage serviceability buffers further or introduce loan to value ratios, or debt to income constraints.

“Interest rates are another risk … our baseline assumption is that the RBA will begin to lift rates from the third quarter of 2023, but it could start earlier if inflation overshoots expectation.”


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Lending restrictions could hit property investors

property investors

Property investors are likely to find it harder to obtain the big mortgages often required to buy free-standing homes after regulators signalled they would likely act to tighten lending rules.

The Council of Financial Regulators says that with credit growth materially outpacing growth in household income, there is increasing medium-term risks facing the economy, even though lending standards remain sound.

The Australian Prudential Regulation Authority (APRA), which is a member of the council, is weighing up what measures it could take to curb riskier borrowing.

One of the tools APRA could use is to make lenders subject to a cap on mortgage lending to borrowers with a ratio of more than six times debt to annual gross income – the point at which it considers the lending to be risky.

CoreLogic data released on Friday show Sydney house prices are now up 25.8 per cent since the year began, with Melbourne prices up 16.2 per cent.

In September, Sydney’s median house price soared by $18,000 to $1,311,641 – a stunning gain of about $600 a day. In Melbourne, the median jumped by $7750 to $962,250 – up about $260 a day.

Nationally, the monthly growth rate in prices slowed to 1.5 per cent, compared to its peak rate of 2.8 per cent in March.

The CoreLogic figures show house values are generally rising faster than unit values, a trend that has been evident throughout most of the COVID-19 period, especially in capital cities.

“There has been a shift by investors from units to free-standing houses,” says Doron Peleg, founder of RiskWise Property Research.

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