What The Latest Reserve Bank Rate Cut Decision Means For The Property Market

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The Reserve Bank’s decision to slash interest rates for the second time in just two months, sees industry experts predict that it will “no doubt” have a positive impact on the property market as buyer confidence returns.

Rate cuts which were observed in 2008 and 2011 provided the platform for a strong recovery in property, and although AMP Capital chief economist Shane Oliver says wider conditions are at play in terms of the general economic forecast this time round, feels that the worst of the property downturn has been experienced.

“There’s no doubt it’s positive for the housing market,” Dr Oliver told news.com.au.
“We’ve seen in the past interest rate cuts do help housing demand because they make housing more affordable — it’s easier to get a loan, you’re on low rates. It means there’s a wider group of borrowers who might be able to get into the property market.”

The general consensus is that many home buyers whether they be investors, owner occupiers, first home buyers, downsizers, upsizers or simply those back into the market, were sitting on the sidelines for quite some time. Now, however, there is elevated demand out there which should see the property market experience a rebound.

Corelogic research analyst Cameron Kusher furthered this sentiment by stating that the combination of the removal of APRA’s 7% serviceability buffer and lower interest rates would certainly see more activity in the property market.

Mr Kusher also believes that he suspects that there will be a wave of buyers in particular upgraders looking to obtain a more expensive mortgage once the reduction in monthly repayments was realised as a result of RBA Governor Philip Lowe reducing the rate.

“In most cities, particularly in Sydney and Melbourne, yes values have fallen across the board but more expensive properties have seen a larger fall in value,” he said.

“So while your property might be worth less, the property that you’re upgrading into may actually be relatively cheaper because it’s fallen by a greater margin.”

The flattening of prices is also a key indicator to investors to jump back into the market, fuelled by the rate cut and the positive election result for the sector.

All in all, the message that the market has bottomed appears to be more apparent with increased confidence and activity all round.

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