Fears Perth property prices will overheat

WA homeowners have reason to welcome yesterday's interest rate cut but opinions are divided on whether the move will put further pressure on Perth's housing market and push prices higher.

Industry figures welcomed both the Reserve Bank's 25 basis points cut and the swift response by most of the country's big banks to pass on the cut, saying it would ease the pressure on homebuyers struggling with the high cost of living.

But while some said the rates cut would ease WA's housing affordability problem, others suggested it could create a housing bubble.

Real Estate Institute of WA president David Airey said he did not expect the cut to bring a flood of new buyers into the residential property market.

"I don't think this RBA decision will boost the residential housing market any further, because turnover is already strong with sales activity now back to our 15-year average," he said.

"However, it will certainly help first-homebuyers struggling with the overall cost of living and may encourage a few more investors to return after several years of low profile.

"I think people have already priced in this and all the other cuts. The fact that the property market's been running hot since November (suggests) tremendous confidence has returned into the market."

Community Housing Coalition of WA executive officer Barry Doyle said the rate cut risked worsening the State's housing affordability crisis and could create a bubble  in the residential property market.

"The Reserve Bank's decision … means that the threat of a housing bubble developing in the WA market has become all too real," he said.

"A potent cocktail of strong economic fundamentals and cheap money is, predictably, causing house price inflation already."

Perth house prices set record highs this year but fell 2.6 per cent in April, according to RP DataRismark figures.

Residential developer Nigel Satterley said the rate cut would mean a saving of about $65 a month on an average home mortgage.  "This rate relief will be a strong incentive for people to escape the rental market and acquire the biggest investment they may own - the family home," Mr Satterley said.

Maylands homeowner Paula Boxall said she and husband Edward were "obviously very delighted" by the move.

"We have several investment properties so, collectively, it makes a big difference to us," she said.

"We're looking for hundreds in savings because of the other properties."

Source: The West Australian