Rate cut to spark market
PROPERTY experts are tipping a strong selling market on the Gold Coast come spring thanks to yesterday’s cash rate cut by the Reserve Bank.
The official cash rate has been cut for the second time in two months, hitting a record low of 1 per cent.
While the target was not the property market, but rather the stimulation of weak economic activity and inflation, property owners are expected to benefit.
ANZ became the first of the big four banks to reduce variable mortgage rates yesterday following the Reserve Bank’s decision, this time passing on the full amount.
The 0.25 per cent cut by the Reserve Bank follows last month’s drop to 1.25 per cent and could encourage more spending in the city according to industry experts.
Real Estate Institute of Queensland Gold Coast chairman Andrew Henderson said the cut, alongside new infrastructure and strong migration to the city, would lead to a strong spring market and bumper summer for the Glitter Strip.
“These are historic lows which is definitely good news for those with a home loan and are very positive signs for us,” he said.
“The rate coming down will make the return on investment better and gives people with mortgages more opportunity to borrow or cash in their pocket (which) they can use to upgrade their existing property.
“Those with savings should take their money out of the bank and buy property – it’s a much better rate of return.”
Knight Frank head of project marketing for residential Chris Litfin said he expects the cut to flush out “non traditional” property investors and put pressure on the bottom of the market.
Mr Litfin, who is marketing a number of projects including the 40-level Qube tower in Broadbeach developed by Morris Property Group, said yields range between 5 and 6 per cent gross.
“Even if you are getting 3.7 to 4 per cent, it is still higher than you can get on a term deposit,” he said.
“I think it will bring out the non-traditional investors, because the returns are so positive compared to the share market or term deposits.”
Herron Todd White Gold Coast director Ryan Kohler, who specialises in commercial property, agreed. He said the cut may spur investors to look outside of traditional places to park their money such as government bonds.
“One of those options is commercial property,” he said.
“The cut is being seen as a positive, however, that is tempered by the fact that the cut is being introduced due to weak economic conditions.”
Mr Kohler said positive sentiment in the market is not currently feeding into a higher volume of sales.
“The volume of transactions are still low but the agents we are talking to are saying there are a lot of properties in the pipeline,” he said.
“We have not seen that translate into anything yet.”
CoreLogic research analyst Cameron Kusher said the market would start to level off thanks to the cut.
“Despite these positives, the scrutiny on loan applications will remain significantly greater than it has been in the past,” Mr Kusher said.
“The expectation is that a recovery in housing market conditions is likely to be slow and gradual despite lower interest rates. Our expectation is that banks will be holding back on passing on the full cut as they seek to balance out mortgage rates with deposit rates and protect net interest margins.”