Stable interest rates to attract investors back into the market

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The Reserve Bank of Australia's decision to keep interest rates on hold for the foreseeable future is likely to reignite investors' interest in the market, according to an economist.

"The reduced likelihood of any further rate hikes over the short term is likely to see investors and homebuyers crawling back into the market," said Savanth Sebastian, economist with Commsec.

Savanth made the comment following the release of new residential housing research, which showed that new residential building approvals surged by 10.1% over April - the largest increase in two years. Apartment approvals also jumped sharply and are now almost 5% higher in annual terms.

With vacancy rates sitting at a 30-year low, the outlook for higher yields is becoming attractive to investors.

"Rents have been increasing at the fastest pace in 18 years, and the large pent-up demand for housing is likely to see rents travel further," said Savanth. "Clearly the housing market is still going nowhere, but it's commercial building that continues to be the meal ticket for builders and tradespeople, ensuring that a steady stream of work is available."

The RBA left its benchmark interest rate at a 12-year high of 7.25% to gauge whether its previous tightening stance will be enough to cool inflation.

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Tuesday, Sep 26, 2017
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