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Today in property: place your rate cut bets, green shoots of recovery, new land defaults hit 27pc

The pundits are out in force ahead of the Reserve Bank meeting next week.  Popular consensus says we'll see a rate cut within the next few months, but the big question is when...the AFR's John Kehoe reckons we won't see it next week as the RBA hasn't had enough time to get the public and financial markets ready for it, whereas Macquarie has added its voice to calls for a cut before the May 18 election.

Coolabah Capital's Christopher Joye suggests the RBA is looking for alternative measures - specifically, "lowering the minimum 7.25 per cent interest rate banks use when assessing a home loan borrower's repyment capacity by 50 basis points to 6.75 per cent.  Christopher argues such a move will increase borrowing capacity more effectively; his article in the AFR very neatly lays out the argument for this move.

Whatever happens, the unveiling of surprisingly low inflation figures last week revealed that the RBA is a damned if you do, damned if you don't position.  The economy is weak, and financial markets want a rate cut to improve it - but doing so next week will set off a political bomb.

Some good news for home loan aspirants though, is that last week's inflation data also showed that funding costs have fallen through the floor this year - so if rates do get cut, the banks have lost their best argument against passing those savings along to customers.

This coincides with CoreLogic's April national house price figures which suggest green shoots may be appearing in the housing market.  The decline slowed this month, with Sydney and Melbourne leading the national improvement; Sydney went from a 1.6 per cent fall in December to a 0.6 per cent decline in April, while Melbourne went from a 1.5 per cent drop in December to 0.5 per cent decline in April.  That'll be small comfort for the one in four Sydney and Melbourne housing lot purchasers who bought at the peak of the market, only to find they couldn't make good when prices dropped; Research4 figures show the cancellation rate on new lots in Victoria - Australia's largest greenfield land market - has hit 27 per cent.

Domain Group has come out today with its own research showing that even if the downturn slows, Sydney's median house price will fall below $1 million by the end of the financial year.  Good news for buyers who are in a position to buy.

Athena Home Loans is looking to take advantage of this situation, as it steps up efforts to raise capital.  Since Athena launched in February, it has fielded applications for more than $800 million of home loans; most of these are subsequent home buyers looking to leverage the significant equity they hold in their home; the majority are shopping around for alternatives from the more inflexible major lenders.  

Speaking of, ANZ has joined Westpac, NAB and CBA to reduce their reliance on the household expenditure measure (HEM) when assessing an applicant's ability to service a home loan, a move that the mortgage broking industry has said will make it harder and more time-consuming to get finance.

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