There’s nothing like a good interest rate cut to get the market moving, or at least that’s the prevailing theory. And with the February announcement taking RBAs interest rate down to the record low of 2.25%, and rumours of another cut to come, speculation about exactly what this means for the Australian property market is coming in thick and fast.
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The cut comes at a time when Melbourne’s residential property market was already steadily rising, with prices going up 8.1% over the last 12 months, and it’s expected the effects will be particularly pronounced in the middle and lower ends of the market as prospective borrowers gain greater confidence in their ability to take out and repay mortgages.
First home buyers are expected to feel especially encouraged to take advantage of this opportunity to secure their first mortgage with greatly reduced repayments. The effect of which would be a further rise in the demand for, and the price of, houses in the lower end of the market.
The Herron Todd White Month in Review suggests paying particular attention to movement in Melbourne’s outer suburbs, where the median sale price for houses sits at around $350,000 and are home to a number of mass property developments. The Housing Industry Association also indicates that 2015 will see an uptake in construction of homes, especially in the first few months of the year.
Suburbs in the inner city and inner suburbs are not expected to see any drastic changes as a result of the interest rate cuts, with home owners in these areas typically earning more and less likely to be tempted by the small downward movement.
The commercial property market is a different story again. The Melbourne vacancy rate is currently sitting at 9.1%, below the national average of 10.8% and the Australian CBD average of 11.2%. Demand is holding steady, and it’s showing every sign of a market on the rise.
It’s another area attracting international investors, particularly for central CBD locations. We can expect that investors, both local and international, will feel encouraged by lowered interest rates and that we’ll see an increase in the already strong numbers of international investors as a result.
The complete March 2015 Herron Todd White report is attached below for your information. Click on the image to access the report.
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