Interest rates remain at 2.50% in May

Official interest rates remain on hold, with the Reserve Bank of Australia opting to continue its run of stability.

Governor Glenn Stevens said demand for labour had been weak in the past year and the unemployment rate had risen.

“Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments,” he said. 

“The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards.”

Read the official RBA statement.

The official interest rate is 2.5% and has been at the same level since August last year, when it was cut 0.25%.

Commercial property experts said the on-hold decision was not surprising.

No surprise in on-hold interest rates

CBRE Head of Research Stephen McNabb said rates were expected to stay on hold this year and then rise in 2015.

“Usually markets react to higher rates adversely on simplistic expectations that higher rates mean higher yields and lower capital values,” McNabb said.

“However, we have to remember that higher rates will only come about on stronger growth expectations and that these will tend to offset the impact of higher rates.

“Australia is arguably better placed than some markets globally in which asset values for property and equities do appear to have been more impacted by easy monetary conditions.”

Steady rates to help sustain recovery

JLL Director, Research and Consulting, Leigh Warner was also unsurprised at the RBA decision.

“Leasing conditions are improving, but are still very patchy across the commercial property sector and an extended period of stable low interest rates would be welcomed to ensure the sustainability of this recovery,” Warner said.

“While business confidence has generally risen in 2014, decision makers need to firmly believe that any recovery is sustainable before they will contemplate expansion and lease more space.

Leasing conditions are improving, but are still very patchy across the commercial property sector

“Consequently, strong guidance that demand will continue to be supported by low interest rates is important at this point in the cycle to maintain the momentum in this emerging recovery.”

RP Data Research Director Tim Lawless said the RBA would have taken comfort from recent RP Data and Rismark figures showing capital gains in the nation’s housing market are starting to return to “more sustainable levels”.

Read more: What do rates on hold mean for residential property?

Lawless said while low interest rates were likely to encourage higher levels of housing market activity, “natural affordability barriers and low rental yields will continue to dampen the exuberance that has been very much evident in Sydney and Melbourne”.