Following the release of the monthly RP Data-Rismark and Residex house price results yesterday, I thought it timely to update how the housing market – in particular house prices – is responding to the latest round of interest rate cuts, which began in early-November 2011 and has seen mortgage rates fall by around -1.5%.
The first chart below compares the growth in the RP Data-Rismark 8-city dwelling price index since end-October 2011 (i.e. immediately prior to the first interest rate cut) against the growth achieved following the commencement of the three prior interest rate-cutting cycles in 1996, 2001 and 2008:
As you can see, capital city dwelling prices have remained more or less flat since October 2011, according to RP Data-Rismark. By contrast, at the same stage of the three prior rate-cutting cycles, dwelling prices had risen by an average of 16%.
The Residex house price index has shown better growth, with capital city prices rising by around 1% since October 2011. But again, this is well below the 13% average growth experienced at the same stage of the three prior interest rate cutting cycles (see below chart).