Industry experts believe the housing industry will see a boost after the Reserve Bank's widely anticipated rate cut, but economists warn there are significant risks of another investor-driven boom in housing values.
Harley Dale, chief economist of the Housing Industry Association, is optimistic that the drop in cash rates would support residential construction, which he considers the "star performer" in the economy. He noted that residential construction managed to create considerable employment.
"A further 'touch down' to interest rates will help maintain very healthy levels of new home building, while hopefully broadening the base of Australia's economic growth," Dale said.
Bank of America Merril Lynch economist Saul Eslake echoes Dale’s sentiment, saying that the cut will boost borrowing by investors.
Recent data shows there were over 200,000 building approvals made in 2014 or an 8.8% increase over the year. For economist Dr Kim Hawtrey, these figures are very significant.
"The December monthly result confirms we are living through Australia's greatest-ever home building boom", the BIS Shrapnel economist said.