Successive rate cuts in the official cash rate during the last 18 months has precipitated undesirably high rates of inflation in the price of residential property in Western Australia, further worsening our housing affordability problem.
According to ABS data released today (http://www NULL.abs NULL.gov NULL.au/ausstats/abs null@null NULL.nsf/mf/6416 NULL.0) which measures house price movements in Australia, WA established house prices are up 6% since March 2012.Conversely, house price growth in all the other major capitals barring Darwin has been much more modest. (See graphic below fold)
The Reserve Bank of Australia’s decision to cut the official cash rate to a record low of 2.75% adds further fuel to the inflationary fire. In fact, with rates this low and with the prospect of further cuts to come, the prospect of a housing bubble (http://www NULL.investopedia NULL.com/terms/h/housing_bubble NULL.asp) developing in the Western Australian market is becoming a real threat.