The RBA cash rate is not the only lever at work within the property market

The property market has its momentum, so just whether it needs another rate cut is arguable. 

And ofcourse the RBA is not the only lever at work within the property market.

There's plenty of experts expecting a fillip from a change of federal government following this Saturday.

The Sydney-based LJ Hooker deputy chair L Janusz Hooker says that a change of government will help fuel the buoyancy and there will be continued confidence and strengthening of prices.

Property economist Martin Bregozzo actually argues there is an overstated correlation between interest rates and house prices.

He points to the following chart that examines the relationship between the change to interest rates and the change to the nominal median Australian house price — taken as the weighted average of the six capital cities.

Bregozzo concludes For the past 32 years to 2012, the annual change to nominal house prices may be explained by changes to interest rates for some 37.8% of the time.

And then he says what’s really interesting is that for part of the time the correlation is negative — when rates go down, prices go up and vice versa — while for part, a positive correlation, and for part of the time there is no correlation.

When the data is examined on a quarterly basis, the “relationship” becomes even more tenuous 12% correlation. When comparing of the annual change to interest rates and real house prices the correlation is 20.7%.

Its the wise conclusion that while interest rates have some impact on house prices, both are responding to and participating in the overall economic cycle.

So the specifics of locality and population interact with the economic cycle as key drivers of price at the  local level. And also the recent price momentum or lack of as has been the case in Sydney over the past decade.

RP Data research shows capital city values have increased at a 4.4% annual rate since 2003, with Sydney the laggard of all capital cities over the subsequent 10 years with the annual rise in values being just 2.5%.

Every other capital city fared better from Canberra's 4.5% growth to Darwin's 9.8%.

The depth of the post-gfc cautious conservatism as borrowers are building buffers into their loans differs across various demographics across the country.

And the other factor that impacts on the weight of reaction is that some 40% of borrowers are ahead in their repayments with 15% by two or more years.