Low interest rates boost property market

Interest rates have a pronounced effect on the property market, with RBA rate cuts historically pushing house prices upwards. In fact, low interest rates have been a major driver of price growth over the past two decades. Melbourne house prices, according to Domain, strengthened significantly after mid-year rate cuts in 2016, while the RBA’s rate cuts from 4.5% to 1.5% between 2011 and 2016 saw median house prices increase by 60%.

While other factors, such as taxes, lending requirements, population growth, income growth and supply and demand, affect house prices, both local and international research suggests interest rates have a particularly significant effect.

Low interest rates, while generally stimulating the economy, boost cash flow for borrowers, enabling them to take on higher debt levels. They also make investing a more attractive option given a higher net rental income, with many investors capitalising on the opportunity to buy another property and pay their debt off faster.

The RBA’s more recent consecutive rate cuts, which have reduced the cash rate to an historic 0.75% low are, together with tight stock levels and a relaxation of lending criteria, having a very positive effect on the market, with both house prices and auction clearance rates increasing.

Melbourne house prices have been steadily increasing, with five consecutive months of growth recorded. The recovery trend in Melbourne has overtaken Sydney in October, with dwelling values surging 2.3% higher over the month; the largest month-on-month gain since November 2009. This saw Melbourne house prices increase to a median of $650,197.

CoreLogic Research Director, Tim Lawless, explains, “Demand for housing is responding to stimulus measures, including mortgage rates that are now lower than anything we have seen since the 1950’s and improved mortgage serviceability tests following APRA’s decision to adjust the minimum interest rate serviceability rules in July this year.”

Between price increases and many spring buyers competing for too few properties, and with Noel Jones’ auction clearance rate often well-outstripping the wider average, now might be a very good time for vendors to get in touch.

Share:

More Posts

March Quarter Update

“Unprecedented” was one of the most commonly touted words of 2020, frequently used to describe the events being experienced due to the COVID-19 pandemic. Its use, however, has continued in earnest in 2021, but this time in relation to the increasingly robust activity being witnessed in the Australian property market. 2021’s Q1 results have delivered record outcomes in a number

Record low interest rates keeps the property market sizzling

It’s the tiny number that has a massive impact on our economy – and Australia’s interest rate is expected to stay small for some time yet. The Reserve Bank opted to keep the official cash rate on hold at 0.1 per cent at its April meeting. This was the fifth time the rate was cut or held at the record

A Styling Consult With A Difference

When you sell your home styling it for sale is big business these days. Removing all of your furniture and having a staging company move in their carefully curated furniture, homewares and artworks is quite commonplace. If you don’t wish to go to that expense and effort and you already have some beautiful furniture in your home, there is a

DIY cleaning approaches for a sparkling home

A clean abode is a must-have before selling. The only rapt person to discover a mouldy bathroom (complete with a stained toilet) is a bargain hunter who knows they are likely to nab a great price. A fresh, hygienic home leaves a positive impression on a would-be buyer – and makes any homeowner feel great, too. Here are some tried-and-tested

Send Us A Message