The scene is set for a buoyant spring selling season as lenders begin to pass on the 0.25% cut to the official cash rate announced by the Reserve Bank of Australia at its August meeting.
At 2.5%, the official cash rate is now the lowest it has ever been, with the RBA making the cut as part of its effort to rebalance the economy as the mining boom comes to an end and the Australian dollar remains relatively high against the US currency.
I expect this interest rate cut to give the property market a kick along in the traditionally busy spring selling season, and the fact that we also have an early election date set – 7 September – gives the real estate market another boost because it provides homeowners and buyers greater certainty at the start of the season.
This should spur into action those homeowners who’ve been sitting on the fence, as they gain confidence from the combination of surging buyer numbers and improving home values.
Indeed, Tim Lawless, national research director of RP Data, notes that the housing market was already responding to previous RBA cuts to the cash rate, which has dropped by 2.25 % since November 2011. Mr Lawless recently told the Courier Mail that dwelling values have risen by 6.5 % since the housing market reached a low point in May 2012. This equates to a gross profit of around $30,000 for the average homeowner.
Furthermore, capital city property values increased 3.5% in just two months before the latest cut to interest rates, according to RP Data-Rismark figures published in one media report – extrapolate that over the next 12 months and imagine the kind of growth that might be achievable by homebuyers and investors who do their research.
However, as a new wave of buyers is likely flushed out by lower interest rates, in many markets they will find a shortage of homes for sale. Residential listings continued their downward trend in July, plunging nationally by another 2.1 %, according to SQM Research.
Anecdotally, there are 25–35% fewer homes for sale than in previous years, and the lowest interest rates on record are only going to increase the demand. For vendors who have been standing back waiting, thinking about selling their homes, now is a good time to act.
Angus Raine is a leading commentator on the Australian property industry and has been CEO of the Raine & Horne property group since 2006.
Mr Raine started his real estate career over twenty six years ago, previously working with three blue-chip international real estate firms, before becoming director of Raine & Horne Holdings Pty Limited in 1998.
Mr Raine is an accomplished real estate specialist and his academic and industry qualifications include a Diploma of Business (Valuation) and a Diploma of Business (Franchising). He is also a registered valuer, a Fellow of the Australian Property Institute, Member Royal Institution of Surveyors (MRICS), and a licensed real estate, stock and station business agent.
Angus is a Graduate of the Harvard Business School’s Owner/President Management Programme, and has a professional certificate in Advanced Corporate Real Estate (API/UWS).
Since 2000, Mr Raine has been a committee member of the Family Business Association’s New South Wales chapter.