Close to zero interest rates will be a shot in the arm for real estate

NOVEMBER 3, 2020

Today’s decision to drop the record-low cash rate to virtually zero will provide property markets around Australia with a significant shot in the arm for the remainder of 2020, according to Angus Raine, Executive Chairman, Raine & Horne.

The cut to a rock bottom low of 0.1% is also the first time the RBA has altered monetary policy on Melbourne Cup Day since November 2011. The RBA adjusted the cash rate on consecutive Melbourne Cup Days between 2006 and 2011.

“Today’s announcement augurs well for Australian property in the New Year, as it’s sure to give those homeowners who have been sitting on the fence since the beginning of the pandemic the confidence to make a move to sell,” said Angus. “The cut is also timely given some of the banks are winding up their loan deferral programs this month.”

Deep spring market

The facts are that most markets around Australia have a shortage of properties for sale - yet buyer demand is high, Angus noted. Apart from low interest rates, the big spending Federal Budget in October along with massive state government infrastructure projects have provided buyers with more confidence, according to Angus.

“Strong buyer demand is forcing days on market down to near record lows. For example, it’s taking just 21 days to sell a property in Sydney, and about the same in Darwin. This type of data is giving plenty of vendors around Australia the confidence that they still have time to sell before Christmas.

“Also, don’t forget if you’re planning on selling by Christmas, an auction can speed up the process, and send a positive message to curious and eager buyers that you’re serious about selling.

“A shortage of listings has been holding back the market as many buyers have been unable to find a suitable property despite the swag of government incentives and record low-interest rates.”

Looking ahead, Angus predicts the rate cut will encourage even more buyers to turn up to open homes and auctions in metropolitan and regional markets between now and Christmas. “We also believe that after a short festive break, market action will pick up speed again from 5 January given improved buyer confidence.

Angus added, “I’d also urge all the lenders to help the RBA and the government with some heavy lifting by passing on as much of the 15-basis point cut as possible to borrowers.

“If your lender doesn’t pass on the rate cut, there is nothing stopping borrowers from moving their business elsewhere.”