Interest rate cut sets the scene for buoyant buying
Posted on Wednesday, November 02 2011 at 4:50 PM
Yesterday’s official cash rate drop could be setting the scene for buoyant buying times ahead in the housing market, according to Laing and Simmons general manager Leanne Pilkington.
“Ten years ago lower interest rates stimulated the property market and we find ourselves facing similar fundamentals now,” said Pilkington.
“Values have shown recent declines but should stabilise in time, creating a soft market that presents attractive opportunities for first homebuyers, upgraders, as well as investors to become active again.
“A compelling argument could be made for 2012 being the best year in the past decade to buy residential property.”
By mid 2012 Laing and Simmons forecasts interest rates to drop a further 75 basis points by mid 2012, resulting in increased consumer spending and stabilisation of property values, particularly lower-priced properties close to the capital centres.
While property values may demonstrate a subdued performance in the short term, as long as new housing continues to be constrained due to reduced credit availability, rental vacancy rates will continue to tighten; a positive for rents and property values, said Pilkington.
“More immediately, however, we can expect values to stabilise. There will be pockets where values will rise comparatively quickly, particularly in lower priced new residential developments close to the city, again driven by the lack of supply of properties at lower price points in good locations,” she said.
“Declining interest rates, stabilising values, lack of new supply, rising rents and a low vacancy rate are converging to create a most attractive environment for property purchases – a scenario the market has not experienced for 10 years.”
