A sigh of relief - for now!

The relationship between inflation and interest rate rises, and the financial pain it has caused, has been well-defended in recent months.

And the strategy seems to have worked.

This week the RBA kept the cash rate on hold at 4.35%, which was a surprise to very few. In the lead-up to their meeting most economists and analysts agreed that inflation figures were relatively steady, albeit still high, and there was little justification for moving the rate in either direction.

However, despite the overarching opinion being that the next move the RBA makes will be a downward one, the bank fell short of making that clear this week.

The RBA’s priority remains to return inflation to its target range of 2-3% and agrees that it is too early to make the call that it is moving sustainably towards that range. They will need to be confident that their policy has worked before shifting the dial downward on rates and most predict that won’t be until at least 2025.

The most intriguing aspect of the real estate market of late has been its resilience in the face of higher interest rates and cost of living pressures. This has been evidenced by a reacceleration in the pace of value growth through the first two months of the year. Demand has remained strong, which has countered any anticipated weakening of prices, and sellers, who put off their move due to uncertainty, have started to feel confident enough to give it a go.

With the prevailing opinion being that the next move for rates is a downward one, we will see consumer confidence shift in a more positive direction. With this could come an increase in housing demand as more buyers are poised to secure a property.

The worsening imbalance between supply and demand is well documented and solutions are still being debated. In the meantime it has created upward pressure on both rental and purchase prices and when increasing consumer confidence, low unemployment and better than expected economic figures are put in the mix, it appears that the only way for dwelling values is further up.