How will the housing market respond to this week’s aggressive move by the Reserve Bank to slash the Official Cash Rate by 0.5% to a historic low of 1.0%?
Most commentators agree this will further stimulate the housing market, but we are unlikely to see prices rocket up as they have over the last few years. However, indications are that capital growth over the next 12 months will remain strong. One commentator, the Westpac Chief Economist Dominic Stephens, forecasted an upwards of 7% house price inflation next year.
The consensus is that while we are enjoying incredibly low interest rates, the tight lending criteria imposed by banks (mainly the loan to value ratios) will keep the lid on runaway property values.
So, what does this mean for buyers and sellers?
This week’s announcement should give both buyers and sellers the confidence to make property decisions with the knowledge that the housing market is stable. With interest rates still trending downwards, this bodes well for the market going forward.
Some media reports this week are stating it is cheaper to buy a home than it is to rent one. When coupled with the fact that the interest rates on bank deposits are at an all-time low - this gives rise to increased activity in the property market. The increased activity comes from those seeking higher returns, and also tenants wishing to secure homeownership.
The facts speak for themselves – property is still going strong, and our Summit team are keen to assist you with your next property move.