Rate cut to fire up SA property market

Continued from June newsletter.

Harcourts South Australia chief executive officer Andrew Friebe said the interest rate cut would fuel market activity, particularly leading into Adelaide’s wetter months.

“This will certainly fuel on first homebuyer activity and spur on investors chasing returns as the rates come down their returns go up because their repayments are less,” Mr Friebe said.

We’re certainly seeing a lot of investors coming back into the market from interstate, especially developers who see Adelaide as really good buying.

“There are also a lot of apartments to be released this year through the CBD so interstate investors will be quite excited about that.”

Mr Friebe said the rate cut would provide welcome relief for many households.

“For those sitting on their houses it encourages them to go out and spend the extra money on the economy and having an extra $50 in your pocket a month will go a long way for a lot of people,” Mr Friebe said.

“It represents a good saving across the whole year and means people can pay off their home loan quicker as well by putting that money into an offset account and pay off their loan faster, so it stimulates the property market as well.”

CoreLogic RP Data head of research Tim Lawless said the RBA was in the tough position of trying to stimulate economic growth without placing extra burden on housing demand.

Since the previous interest rate cut in February, CoreLogic RP Data have reported auction clearance rates moving to new record highs and the annual trend in capital gains has rebounded higher after moderating over most of 2014.

“With mortgage rates now moving even lower we are expecting dwelling values will continue rising, however it is hard to imagine the high rate of capital gain in Sydney won’t start to moderate over the coming months as investor demand is curbed by tougher lending standards for investment loans and also by diminishing rental yields and affordability,” Mr Lawless said.

“Potentially we may start to see stronger housing market conditions in cities like Brisbane and Adelaide where capital gains have been relatively muted over the past two cycles of growth.”

The rate cut announcement came just a week before Treasurer Joe Hockey is due to deliver the 2015 budget.



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