Sydney Property Remains RBA’s Thorn

Sydney’s soaring property prices are not expected to slow any time soon, possibly putting the brakes on further rate cuts from the Reserve Bank.  Prices in Sydney have grown at the equivalent of an annual pace of 25 per cent since the RBA’s February rate cut, property valuation firm Propell says in its latest housing report.  And it’s this massive growth that is holding the RBA back from another rate cut.

“Sydney remains the biggest headache of the RBA as it seeks to balance the needs for economic growth against boom conditions in Sydney,” the report said.  “At the equivalent of 25 per cent per annum growth, it is too much for the RBA, which has put cash rate reductions on hold, primarily because of this market.”  A rate cut is widely expected to occur in May, but that could be delayed as the RBA tries to keep a lid on Sydney property prices, Propell said.

It expects Sydney’s market to remain white hot in 2015, with prices soaring another 15 per cent after 2014’s 15 per cent rise.  It’s a different story for the rest of the country, with price growth of just 1.4 per cent expected.  Prices in Brisbane, Adelaide, Hobart and Darwin are no higher now than they were five years ago, the report said.