The attempts made by Reserve Bank of Australia to cool down Melbourne and Sydney’s overpriced housing markets are showing impact, as per real estate agents.

Many Australian property agents are reporting reduced numbers at the auctions in two capital metropolises. There is also less bidding pressure after consecutive year price growth, which exceeded 8 percent and 14 percent in Melbourne and Sydney respectively.

Steps taken by RBA

The Reserve Bank of Australia recently pushed up its warnings that concerned falling house prices and increasing its effort to cool off the property market. The bank has also recommended the usage of “macroprudential tools”, like a more rigorous testing of the ability of borrowers to withstand rise in interest rates. It allows to minimize the build up of risk from owner occupiers and investors from quickly increasing house prices.

Brian White, the Chairman of Ray White, says that this kind of “jawboning” by Glenn Stevens, the RBA governor, had been quite effective. He said that comments from RBA do an excellent job when it comes to cooling the things down compared to the rise in the interest rate.

Real estate views

Shannon Whitney, the Chief Executive of Bresic Whitney, a real estate group in Sydney, agreed that the policy of the central bank in taking the heat off housing prices is having an impact. He said that activity in the field is much reduced and people have listened to the messages sent by the Reserve Bank. Buyers now feel less pressured and give a thought before they buy anything.

These comments were made after data from the RP Data in the first week of October suggested that the growth of house prices across the nation cooled somewhat in the recently concluding quarter. This comes after a lack luster September.

The board of the Reserve Bank of Australia is certain to continue the 2.5 percent cash rate at its Tuesday monthly meeting. However, a few economic forecasters anticipate changed language in accompanying statement around local currency level and the property prices.

The rate of reference will be at a historically low record levels until 2014 end. It can extend even up to the first half of 2015, while many other economists have not fully discounted another cut. A lot of things are dependent on the economic recovery of the United States and consequent timing of Federal Reserve’s initial increase in the interest rate.