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Property investors ‘should watch for further rate cuts’

Date: 08/02/2012

Property investors should not be disheartened by the Reserve Bank of Australia’s decision to hold the cash rate steady yesterday, as further rate cuts could be on the horizon.

This is the opinion of Real Estate Institute of New South Wales chief executive Tim McKibbin, who asserted that while the outcome of yesterday’s monetary policy committee meeting was a surprise to many economists – especially following two consecutive rate cuts at the end of last year – it is likely that further cuts will be made later in the year.

Yesterday was the first time the monetary policy committee had met since December, when it reduced the cash rate to 4.25 per cent.

The two cuts of 25 basis points in November and December last year helped to contribute to a modest overall fall in the price of residential property right across the country, according to the Housing Industry Association (HIA).

Dr Harley Dale, chief economist at the association, asserted that the December 2011 quarter showed an overall one per cent easing of house prices compared with the previous quarter.

Citing the latest update released by the Australian Bureau of Statistics, he asserted that prices during the last three months of 2011 were 4.6 per cent lower overall than during the same period in 2010.

All eight Australian capital cities showed decreases in annual house prices, he said, while every city except Hobart, Canberra and Perth also showed quarterly decline.

Affordable housing is likely to be welcomed by property investors – and Dr Dale said the residential property market will be given a further boost with lower interest rate in 2012.

He also emphasised that it is important to consider each location on its own merits, as overall trends do not take into account the “enormous variations” that can exist between cities and states.

Profile photo of Steve McKnight

By Steve McKnight

Steve McKnight, the founder of PropertyInvesting.com, is a respected property investing authority as well as Australia's #1 best-selling business author.

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