27 May 2010

Falling interest rates! What does it really mean?

With falling interest rates and most economic forecasters tipping the cash rate to drop even further by mid year, it is clear that an opportunity, unlike any seen in recent years, exists for home owners and astute investors.

One optimist is Craig James (CommSec Chief Economist) who says that conditions are ripe for great home-buying opportunities in the year ahead. Lower house prices than in previous years, falling interest rates and lower petrol prices will boost home affordability he says.

Steve Martin (Head of NSW Real Estate Institute) says that the perfect buying platform is right now – interest rates are appealing, first home buyer incentives are attractive and the market is relatively stagnant. Property prices have dropped in some areas by 10-20% and rents are up by 10-15%. An investment in residential property makes so much more financial sense than it did a year ago.

The latest housing finance data from the ABS shows that first home buyers now represent 22% of all market transactions in the residential property sector. The activity at entry level of the property market in the first quarter of 2009 was predicted to increase, fuelled by the increase in first home buyer incentives on offer until 30 June 2009.

These fundamentals also offer the opportunity for existing home owners to upgrade to a bigger home or better location at a more reasonable cost, particularly those who are cashed up or have significant equity within their existing homes.

Regardless of market cycles, good property fundamentals should always deliver good property returns over the medium to long term. The best investments will always  be reasonably priced property well serviced by public transport, arterial roads and good access to necessary amenities such as shopping, schools and health care facilities – otherwise known as “location, location, location.”

Should you be considering taking advantage of these favourable market conditions please call the office.

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