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Rate cut not always a bonus

On Jun 07 2016


Historic low interest rates are dampening the real estate market and creating a desperate shortfall ...

Historic low interest rates are dampening the real estate market and creating a desperate shortfall of listings, warns Australia’s biggest property network LJ Hooker.

 

The Reserve Bank of Australia’s decision to cut the official cash rate last month has been welcomed by consumers, however, it appears to be tightening sales particularly on the east coast.

 

Grant Harrod, LJ Hooker Chief Executive, said while there is an oversupply of homes listed for sale in Perth; it is a different story in Sydney, Melbourne and Brisbane where supply levels are critical.

 

“People just can’t find anything they want to purchase and it has caused a shift in behaviour where they feel it is too risky to sell before buying,” he said.

 

“Supply and demand are continuing to put pressure on prices especially in the metro markets and even in areas like the NSW Central Coast, prices are holding up because there are not enough listings.”

 

Demand for off-the-plan apartments have reached saturation points in parts of Brisbane and Melbourne. Recent sales results, however, show Sydney remains popular for both local investors and owner-occupiers.

 

“Sydney lagged those other capitals in terms of development, so we are still hearing of strong Saturday morning project launches where units are being sold out within a few hours,” Mr Harrod said.

 

“There is the perception that Sydney is always the market that outperforms other cities, but history shows it hasn’t always been that way - most of the growth over the past couple years but has been catch up because prior to that it was fairly flat.’’

 

Current market conditions remain favourable for sellers with continued strong competition expected over winter and in the lead up to Federal election. House-hunters are also finding their dollar is now going further thanks to low interest rates.

 

“People who haven’t been able to find the next property are instead improving their homes and this will increase its `easability’ when reselling - but you do need to be careful not to over capitalise when renovating,” Mr Harrod said.