After 12 increases in official interest rates in a row, dating from May 2002, mortgage holders and prospective buyers have welcomed the Reserve Bank’s decision this month to cut the official interest rate by 0.25 of a percentage point.
The cut appears to have had an immediate and positive impact on the local property market, with the clearance rate increasing by 5% from 59% to 64% last weekend.
As we head into spring, the rate cut is likely to provide a mild stimulus to the property market, which has remained relatively stable throughout the year. The cut in interest rates, a strong local economy and sustained population growth have combined to provide market conditions in which buyers and sellers can be confident.
The release of the June quarter national accounts revealed that Victoria’s economy contributed to nearly half the total economic growth of the nation. These solid economic conditions have helped to drive Victoria’s population growth, which continues at about 1500 people a week.
While there seemed to be an immediate reaction to the rate cut last weekend, the full impact will take about a month to be absorbed by the local market. This timeframe provides vendors and buyers with the opportunity to make a considered decision on whether they should enter the market, raise finances or upgrade from their present home.
Each year the spring selling season sees the number of homes offered for action increase by about 30-40% compared to winter and autumn. Analysis by the REIV to develop forward projections on market activity suggests that this year promises to be no different. This weekend we expect to see about 600 auctions.
Source: The Age, Domain, Saturday September 13, 2008, Enzo Raimondo, REIV
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