Buy with long-term view in mind

THERE is no time like the present to make the leap into the housing market, with record low interest rates and a great choice of properties in the market.

Real Estate Institute of Queensland Toowoomba and Darling Downs zone chair David Snow said for someone currently renting and contemplating purchasing their own home, now was a great time to make the next step.

He said the Reserve Bank of Australia’s cash rate of 1.75 per cent was a generational low and this was reflected in borrowing costs and interest rate payments.

“The level of interest rates have been relatively low for quite some time and it must trigger interest from renters looking to make the leap to home ownership,” Mr Snow said.

“Once you pay rent it is considered dead money — nothing paid off and you have nothing at the end to show for it.

“But repayments to a financial institute is toward ownership of an asset which has a pattern of growth over a period of time.”

Mr Snow said Toowoomba’s residential housing market represented a typical real estate property cycle in that there was a cycle of capital appreciation of time and that needs to be considered over medium term when buying.

This is particularly pertinent to investors looking to start, or grow, their portfolios.

He said there were also people who would need to rent a property so it was vital for there to be a robust rental market.

“Home ownership doesn’t stop necessarily as an owner-occupiers with opportunities for investors to provide a pool of rental properties,” he said.

“It is a confident investor that will purchase property in the current market with the expectation of returning it to the market for a profit in the short-term.

“For investors buying it needs to be for the medium to long-term growth of the asset.”

The decision by the RBA to cut the official cash rate by 25 basis points to the new historical low of 1.75% should be approached cautiously.

According to a statement by the RBA, the Australian economy is currently going through a delicate rebalancing act, following the end of the mining investment boom, said Mortgage Choice chief executive officer John Flavell.

“Yes, the Australian economy is currently struggling to rebalance following the end of the mining investment boom, but that should not give us cause for concern,” he said.

“Data from the Australian Bureau of Statistics shows unemployment is tracking steadily lower, which is a good sign.

“Further, the National Australia Bank Business Survey continues to point to a very favourable business environment for Australian firms. In the hours following the Reserve Bank’s cash rate cut, three of the big four decided to pass on the rate cut in full to their customers.

“While this was largely expected given that Australia’s lenders have come under fire for moving out of cycle with the Reserve Bank in the past, the rate cuts should help to improve consumer sentiment and property demand.

“The rate cuts made by Australia’s lenders will help to make the cost of borrowing more affordable than ever before.

“This should keep heat in the property market and encourage more borrowers to take advantage of the low-rate environment.”