Historically low interest rates set to spur busy spring selling season
The scene is set for a buoyant spring selling season as lenders begin to pass on the 0.25% cut to the official cash rate announced by the Reserve Bank of Australia at its August meeting.
At 2.5%, the official cash rate is now the lowest it has ever been. The RBA made the cut as part of its effort to rebalance the economy as the mining boom comes to an end and the Australian dollar remains high against the US currency.
“This interest rate cut will really give the property market a kick along in spring, traditionally the busiest selling season,” said Angus Raine, CEO of Raine & Horne.
“The fact that we also have an early election date set – 7 September – gives the real estate market another boost because it provides buyers and vendors with greater certainty at the start of the season.
“We’re going to see first home buyers and upgraders who’ve been sitting on the fence now making their move, confident that because of the historically low interest rates, housing affordability will improve no matter the outcome of the election,” said Mr Raine.
According to financial comparison website RateCity, for a borrower with a $300,000 variable home loan at the average rate, August’s rate cut will mean a monthly saving of $44, or up to $150 if they refinance to the lowest variable rate available.
Tim Lawless, national research director of RP Data, notes that the housing market was already responding to previous RBA cuts to the cash rate, which has dropped by 2.25 % since November 2011.
“Since the housing market reached a recent low point in May last year we have seen dwelling values rise by 6.5 %. That equates to a gross profit of around $30,000 for the average home owner,” Lawless told the Courier Mail.
“Transaction numbers are up by almost 18 % compared with the same time last year, which highlights that home buyers, particularly investors and upgraders, are moving off the sidelines and into active buying mode,” he added.
As a new wave of buyers is likely flushed out by lower interest rates, in many markets they will find a shortage of homes for sale. Residential listings continued their downward trend in July, plunging nationally by another 2.1 %, according to SQM Research.
“There are 25–30% fewer homes for sale than in previous years, and the lowest interest rates on record are only going to increase the demand. For vendors who have been standing back waiting, now is a good time to act,” said Mr Raine.
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