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What does the cash rate mean for my Adelaide property?

By Brett Pilgrim

The Reserve Bank of Australia (RBA) decided against changing the official cash rate at its 3 March board meeting, maintaining the same level of 2.25 per cent for another month. While this isn't likely to have a big impact on owners of property in Adelaide, governor Glenn Stevens did hint at the potential for a further rate cut in the months ahead. 

The housing market is a big driver of the board's latest decision. Sydney values in particular have been causing a few headaches, with the Australian Prudential Regulation Authority treating it with caution. Another rate cut could send prices skyrocketing as more people – especially investors – jump at the chance to buy a home. 

The Real Estate Institute of South Australia (REISA) applauded the bank's decision to trim the cash rate to a new historic low in February, with concerns mounting over a lack of sales throughout the state despite rising median houses prices.

"This cut will hopefully increase consumer confidence and encourage more purchasers into the market," president of REISA, Greg Moulton, said in a 3 February statement. 

While overall sales figures were down on the same time last year, detached house sales jumped 5.6 per cent in January according to the Housing Industry Association. Leaving interest rates untouched for another month is not likely to place Adelaide at a disadvantage, as mortgage holders and buyers still have a lot of breathing space.

The RBA is trying to strike a fine balance between stimulating economic growth and keeping a handle on investment in the residential market. House prices have grown 8.3 per cent across the combined capitals in the 12 months to February, with Adelaide seeing median dwelling prices rise 3.4 per cent over the year. According to CoreLogic RP Data, the median property price sat at $410,000 in the South Australian capital as of 28 February, which could make it a good option in a low interest rate environment.  

Mr Stevens said that another cut could be on the horizon, but it would likely depend on how the economy and house market fares over the next few weeks.

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