Rate Cut: Will It Be the Turning Point For The Property Market?

Rate Cut: Will It Be the Turning Point For The Property Market?

4 June 2019

In the wake of the shock federal election result in May, today the Reserve Bank of Australia has reduced the official cash rate for the first time in 34 months.

Let’s take a look at what this all means for the market.

After the shock result at last months’s federal election, where the Coalition were surprisingly re-elected despite years of negative polling, there is a renewed air of confidence around the property market. Regardless of your political affiliation, the ALP’s proposed policy initiatives had a profound effect on consumer sentiment around the economy and in particular property – Long before the election had even occurred. That the media had all but called the result in Labor’s favour long before election day played a significant role in this. People were preparing for what felt like real estate Armageddon. It seemed inevitable.

Whether such negative sentiments were justified is up for debate, but the effect of it all was all too real. And now, with a renewed confidence and the sudden sense that things are on the mend, the RBA has announced today a startling cut to the official cash rate – Which currently sits an an eye-popping 1.25%. While some have suggested that the record low rate is a sign the economy is in real trouble, others among us are adopting a glass-half-full perspective; The real time effect of this, alongside the re-elected government’s proposed incentives to help subsidise first home buyers into established property, should provide a much needed boost to the struggling property market, which in turn will bolster the economy.

From a historical perspective, interest rate cuts help the market in two ways: If passed on by the banks, they make it easier for buyers to access finance, and the increased demand helps drive property price growth. This has obvious benefits for the economy at large but in tandem with proposed first home buyer incentives and relaxed lending conditions, it could just create the perfect storm for the market to roar back into life.

What does all this mean for you?

If you’re a first home buyer looking to get into the market, this is fantastic news. Finance will be easier to obtain and an increase in listing inventory is likely – So you will hopefully have more properties to choose from. Those in the industry have long known that first home buyers are primarily what drives the market; When entry level property starts moving, this has a flow-on effect up the price brackets as those who sell to first time buyers will then trade their more modest homes in favour of something bigger and better. In the end, everyone winds up benefiting.

If you are looking to or have been trying to sell, then this will be music to your ears. Buyer numbers will likely increase which means more opportunities to sell, and the increased demand will boost your chances of getting a good price for your property. For those who own property but who aren’t selling, there are still benefits – An increase in home values equals increased equity for property owners and a shot in the arm for your net worth.

As always, whether you are buying, selling, renting or investing, our property experts are always on hand to assist you with your real estate needs. Call or email us today or drop into one of our offices for a friendly chat.

Till next time, ciao ?

Lee Knutsen

Article by Lee Knutsen

Co-founder & Managing Director of House, Lee Knutsen first entered the real estate industry in 2006 as a residential sales specialist. After more than a decade as a sales agent…

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