The nation’s biggest lender, Commonwealth Bank, says its standard variable rate for owner occupiers paying principal and interest will drop to 4.55 per cent, one of the lowest rates on record
Australia’s property market has nearly entirely rebounded from its correction – and with the RBA’s (Reserve Bank of Australia) rate cuts this week is now a “juggernaut” that even the coronavirus will not be able to stop, one expert says.
I’m not even sure that the bubonic plague would slow down the property market at the moment, said Starr Partners chief executive Douglas Driscoll.
The market is a juggernaut at the moment, a high speed train, Mr Driscoll said, adding that the major banks passing on the RBA’s rate cut in full would only bolster it further.
I think it’s tantamount to throwing fuel on an already raging inferno, he said.
The nation’s biggest lender, Commonwealth Bank, says its standard variable rate for owner occupiers paying principal and interest will drop to 4.55 per cent on March 24 – one of the lowest rates on record.
Smaller lenders were advertising mortgages at rates as low as 2.59 per cent, according to Savings.com.au.
McGrath chief executive Geoff Lucas said he disagreed with commentary that because interest rates were so low, another rate cut wouldn’t make much difference. A 25 basis point cut from a lower base is actually more significant in percentage terms than a cut from a higher base, he noted.
It’s quite a significant move, that will further underpin buyer demand, he said.
Australia’s nationwide rental yields are around 3.8 per cent and interest-only loans are available to investors at in the low three per cent range, Mr Lucas said.
Mr Driscoll said that Australia’s property market had been picking up since around midway last year after the 2017 downturn, something he credited to both the RBA’s rate cuts in June and July and the May federal election result.
Typically property markets plateau for a bit after reaching their nadir, but not this time, he said.
It can without exaggeration be described as a wild swing, Mr Driscoll said. It was almost overnight, it was bizarre, it was crazy.
A year ago vendors would struggle to get anyone to an open home, and now there are crowds, if “not quite queues around the block,” he said.
CoreLogic head of Australian research Eliza Owen said the market had nearly completely recovered from the correction in 2017, which came after strong growth in Australian property values from 2012.
Housing prices in five of Australia’s eight capital cities – Melbourne, Adelaide, Hobart, ACT and Brisbane – hit record levels in February.
In Sydney they grew 1.7 per cent to $872,934, which is still 3.7 per cent below the city’s peak, but it could reach it as soon as April, Ms Owen said.
In Melbourne, house prices rose 1.2 per cent in February – up 10.7 per cent for the year – to $689,088.
In Brisbane, house prices rose 0.6 per cent to $503,265, the CoreLogic figures show.
Unlike the last housing boom where 40 per cent of buyers were investors, this one appears to be more driven by owner-occupiers, she said. Just 29 per cent of buyers have been investors, Ms Owen said.
Mr Lucas said that inventory was still low and there still wasn’t as much activity as in the last cycle.
Mr Driscoll said he worried that the boom was unsustainable and there would be another crash.
Buyers needed to realise that they were looking at not just once in a generation interest rates, but perhaps once in a lifetime interest rates, he said. They should make sure their budget allows for the possibility that rates would rise.
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