Market Watch: Economist issues rate cuts warning

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Economist says interest rate cuts will do little but raise house prices
The recent interest rate cut by the Reserve Bank of Australia, and the possible further cut in March, could do nothing more than raise the price of Australia’s property. That’s the warning from Bank of America Merrill Lynch’s Australian economist Saul Eslake who says that lower interest rates may do little to stimulate the wider economy and may only serve to fuel housing inflation. Eslake believes that the national median price of a dwelling could rise to $497,000 by the end of this year, up from $469,000. He also predicts that interest rates will be cut to 2 per cent in the coming months. With income not likely to catch up with rising property prices Eslake says that Australia’s household debt will continue to rise and highlights the continued weakness of confidence from both consumers and business. He also noted that many Australians are choosing to use the rate cut to reduce the size of their mortgages by keeping the home loan repayments the same as before with the excess reducing the size of the loan.
Source: Sydney Morning Herald

Could online auctions become the new normal?
Online property auctions are still in their infancy with most buyers still venturing out to the traditional Saturday sales. However a recent sale could persuade more sellers that the online model can work, and work well. A three-bedroom house in the Lilyfield area of Sydney sold for $1.6 million after attracting 22 bids in three days. Selling agent Adrian Oddi of Bresic Whitney told The Daily Telegraph that “the industry is ready for a change” and he believes technology will provide that shift. Unlike a traditional auction the reserve price is set on the online auction site in advance but not disclosed and can be changed at any time. There are also refundable fees that have to be paid and at $2000 they are designed to deter time-wasters but the fees are refunded to unsuccessful bidders when the auction closes and to the successful bidder when the selling agent receives the deposit for the property.
Source: The Daily Telegraph
Sydney homeowners look to granny for profits
There’s a growing trend in Sydney with homeowners building second properties in their gardens. In fact everything from veggie patches to car ports are being redeveloped by canny property owners who are cashing in on building granny flats. The NSW planners are being inundated by applications for building projects of this kind; they soared to 4,818 last year from 2,867 in 2013. Malcolm Gunning of the Real Estate Institute of NSW said that homeowners are using equity from their properties after the surge in prices to fund the granny flats. Rental return on the newly build garden apartments can be around 15 per cent.
Source: The Daily Telegraph

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