The continued rise in property prices in Sydney could hinder Australia’s Reserve Bank (RBA) from cutting rates, says a report from property valuation firm Propell.
Sydney property prices have soared at the equivalent of 25% per annum since the RBA’s February rate cut, and it is this that is preventing the bank making further cuts, as it fears reduced mortgage rates will stoke the boom even more.
Sydney prices are expected to rise 15% this year, a stark contrast to the rest of Australia, where prices will rise, on average, 1.4% in 2015, it is thought.
“Sydney remains the biggest headache of the RBA as it seeks to balance the needs for economic growth against boom conditions in Sydney,” the Propell report said. “At the equivalent of 25% per annum growth, it is too much for the RBA, which has put cash rate reductions on hold, primarily because of this market.”