Rate reduction positive for real estate
THE RESERVE Bank of Australia’s historic decision to cut interest rates to a new record low will not only boost a weaker economy but should help first homebuyers come back to the market, according to real estate leaders LJ Hooker.
Chief executive Grant Harrod welcomed the RBA’s quick reaction to cut rates following the surprise March quarter deflation figures and the continuing robust Australian dollar.
"The RBA will be comforted that recent "out of line" mortgage rate increases by the banks and tightening of investment loans and foreign lending will not stoke property price growth,’’ Mr Harrod said.
``Both the Sydney and Melbourne markets are slowing so the RBA is less concerned by suggestions of overheating and are now focused on broader economic fundamentals and what is happening overseas.’’
First homebuyers, who are also set to benefit from the banks ban on non-resident lending, will be further encouraged to enter the market. Lower interest rates are likely to stimulate activity in softer performing capitals such as Perth and Darwin.
``It will improve overall confidence and allow people to get ahead on mortgage repayments and increase mortgage affordability for everyone, however, we don’t expect to see another huge jump in property prices,’’ Mr Harrod said.
``Even with the rate cut, vendors will have to be realistic and cannot expect the rapid growth experienced over the past few years.’’
Mr Harrod said listings are tightening but buyers are still confident and remain active with good attendances reported at open homes since the start of autumn.
Stock levels are expected to dip further in the lead up to Federal election, which is traditionally a quiet period for real estate. The debate about negative gearing is also likely to see investors hold off until a new Government is decided.
``The market is already slowing, so prices will continue to moderate as buyer and investor demand will taper off due to the uncertainty that comes with an election, even with the rate cut,’’ Mr Harrod said.