23 Oct 2019

Interest Rates!

You would have noticed over the last few months that interest rates have been going lower and lower. This is a world-wide phenomenon and a very interesting one indeed for me (which I’ll save  for another discussion along with negative interest rates). A number of our banks are Australian owned therefore we are also following their footsteps where each bank is competing by dropping their interest rates lower.

What does all of this mean for the market? Well I believe the market has picked up in the last few months due to the interest rates being extremely low. Some people say it’s due to spring time other say the vendors are being more realistic – I’m still not convinced that its either of these. I still believe the low interest rates is driving the market;

For property investors looking to buy, they will get better yields. With the low interest rates, better buying opportunities in the market and high market rents property is an excellent vehicle for long term investment. Add a bit of renovation, reclad, or smart subdivision and you can have a formula for success here.

What it means for people like me, who are in the development market is that bank funding is cheaper. This in turn means lower cost of development which will be passed onto the home buyers. The LVR rules and presales rules aren’t affected yet but I suspect as the economy gets stimulated these rules should ease up as well. What I have noticed is an increase in the private finance entering the property market which would help developers.

What this means for the home buyers is that it is slightly easier for the new buyers to get into the property market. It makes it affordable for them to buy a house especially now that the banks are talking about easing the LVR rules. One word of caution is that the interest rates won’t stay low forever so it’s best to still buy in your budget.

What this means for people with money in the banks. I would recommend investing this money either in property or any other investment vehicle out there. With interest rate return being soo low the money in bank is just as much if not less than inflation.

I remember people telling me that interest rates have been as high as 17% but I don’t see that happening in the near future – for the sake of the property market I hope that won’t be the case.

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