Property prices climb to six year high. Does that mean another interest rate rise?

I just read a report stating that residential property prices in Australia increased 3.7 per cent in September to a six year high, which inevitably is heightening the likelihood of a third consecutive rate hike in December.

Also the latest figures from Australian Property Monitors (APM) showed that Melbourne is the fastest growing real estate sector with prices rising 6.1 per cent in the third quarter of the year, the fastest quarterly increase since 2003.

With this supposed growth what do you think the likely hood that an interest rate increase happens again in Dec? Just wanted to get some of you guys perspectives on the situation.

Thanks.
 
Increase in property values is just one of the indicators that RBA considers whilst deciding on the merits for an increase in interest rates.

There is a whole heap of new commentary now that suggests that RBA wont increase the rates owing to decrease in spending in October and the overall inflation figures.

Harris

I just read a report stating that residential property prices in Australia increased 3.7 per cent in September to a six year high, which inevitably is heightening the likelihood of a third consecutive rate hike in December.

Also the latest figures from Australian Property Monitors (APM) showed that Melbourne is the fastest growing real estate sector with prices rising 6.1 per cent in the third quarter of the year, the fastest quarterly increase since 2003.

With this supposed growth what do you think the likely hood that an interest rate increase happens again in Dec? Just wanted to get some of you guys perspectives on the situation.

Thanks.
 
Interest rates are at historic lows and it is inevitable that they will rise as soon as the Reserve Bank feels the economy can sustain the rises.
Marg
 
Reserve bank sets interest rates based on macro economic conditions. Previously the RBA has not responded to asset bubbles in property or shares, they respond to inflation, unemployment and currency pricing.

Good economy leads to rising property.
Good economy leads to rates adjusting back to a "normal" setting.

The two are parallel, but not directly linked issues.

Yes rates will rise. Whether in December or February doesn't really matter. Presuming the economy looks ok they could well rise another 1% over the next 6-9 months.

Mortgage defaults are not the RBA's concern. Discouraging people from borrowing too much by stating rates are going to rise is the best they can do.
 
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