Despite recession, experts say property value should rise
Photo by Pat Whelen on Unsplash
Recent interest rate cuts are predicted to bump up housing prices, as home buyers anticipate consistently low mortgage rates in coming years. The government expects to make alterations to its responsible lending laws, making home loans both easier to acquire and more afford.
Earlier this month, the Reserve Bank dropped its benchmark interest rate to 0.1 per cent, a record low, and suggested that it would stay as such for three years. Both Westpac and Commonwealth Bank cut their lowest fixed mortgage rates to 1.99 per cent a year, and ANZ reduced its lowest fixed rate to 2.09 per cent a year.
Over the September quarter, property prices rose 0.9 per cent, according to data from Domain, and over October they rose 0.4 per cent. Housing prices rose in every Australian city except for Melbourne, which dropped by 0.2 per cent, according to CoreLogic data.
“You’ve got a raft of evidence that is suggesting that conditions are in place for house prices to take off,” said Gareth Aird, CBA head of Australian economics.
“Looking at even the most recent data coupled with the fact that the Reserve Bank took interest rates lower,” he told Domain, “CBA’s dropped their fixed rates quite a bit – that’s going to put further upward pressure on prices.”
“The lending data’s actually been quite strong over the last few months, the auction clearance rates are pretty firm. And, the indications around house price expectations and the consumer confidence surveys have picked up.”
Fears of a crash in property value came predominantly from the slowed rate of immigration and high unemployment rates associated with the pandemic. But Mr Aird said that unemployment has already peaked and is now expected to fall. He also said that despite falling rent prices and increasing vacancies, low interest rates will be strong enough to continue to drive up property prices. He noted that this may be a particularly attractive time for first-home buyers.
Would you consider selling your home to take advantage of steadily increase property prices? Or would you make the most of record low interest rates to invest in property?
My daughter has just bought in Melbourne's east. Whilst looking most places were selling within days, and many offers were being received at a much higher price than that quoted. one even camer on the market at a price and within two days the price was amended to a price range starting nearly 20% higher, and this was before the interest cut. With so much demand and available funds I can only continue to see prices rising. Many regional areas are experiencing increases of up to 25% in the past 6 months.