Interest rates: no change in February

The Reserve Bank of Australia left interest rates on hold today, with the official cash rate sitting at 2.5%.

Commercial property experts say this brings some good news for the industry – particularly those in the tourism-related sector.

RBA Governor Glenn Stevens says stable interest rates will help “foster sustainable growth in demand and inflation”.

He says while global economic growth was a bit below trend in 2013, there are “reasonable prospects of a pick-up this year”.

“In Australia, information becoming available over the summer suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have shown improvement,” he says.

“At the same time, with resources sector investment spending set to decline significantly, considerable structural change occurring and lingering uncertainty in some areas of the business community, near-term prospects for business investment remain subdued.”

Read the full RBA statement here.

Knight Frank National Director, Research, Matt Whitby says the low interest rates of the past six months seem to be having the desired effect, with growth in retail spending, house prices and residential construction.

Whitby says while it is unlikely to be enough growth to completely offset the slowing in mining and engineering investment, there is good news for commercial property.

“In the property sector, contrary to conditions being experienced in the occupier markets across the office, retail and industrial sectors, capital flows into the property sector continue unabated, and with rates expected to remain at their current level for most of 2014, this investment demand will continue,” he says.

“If occupier demand conditions are to materially improve, we need to see a sustained pick up in full-time jobs, which will be driven by persistent strength in business confidence and an upswing in business credit. With the stimulus of historically low interest rates washing through the economy, there are tentative signs that this is beginning to occur.”

Colliers International Director of Research Mark Courtney also expects rates to stay on hold over the next few months.

“Sustained low lending rates will create further opportunities for borrowers in the commercial property sector with owners and investors of tourist property assets being one of the biggest winners,” he says.

“A lower cost of finance will support investment while a falling Australian dollar and improved exchanged rates will encourage an influx of foreign visitors to Australia.”

Courtney expects some of the large Australian lenders to roll over their debt in the year ahead, improving their cost-of-debt profile.

“If the banks decide to pass on the benefits of cheaper finance to their customers then the competition amongst lenders could see lending rates remaining low while the RBA holds rates or even starts a lifting phase,” he says.

RP Data National Research Director Tim Lawless says the decision to keep rates on hold came as no surprise.

“The latest housing market results take annual capital gains across the combined capital cities to 9.8%, with every capital city apart from Hobart recording a rise in dwelling values over the year,” he says.

“The improved housing market conditions have provided a substantial flow on effect to the housing construction sector as developer confidence improves with housing market conditions.”