According to Archicentre, the national building advisory of the Royal Australian Institute of Architects (RAIA) , the announcement of a further 100 basis points cut in interest rates by the Reserve Bank of Australia (RBA) should be a good news for first home buyers.
Robert Caulfield, Managing Director of Archicentre, says that this is a right time for first homebuyers to get into the market.
“Given the likelihood that interest rates will probably dip to around a low of between 2-2.5 percent next year, homebuyers who choose a variable interest rate housing loan will benefit significantly,” says Robert Caulfield.
The current interest rate cut, which brings the official cash rate to just 4.25% will also help boost the economy, especially at a time when retail sales due to Christmas will see an upsurge. According to Archicentre, the recent data from the Real Estate Institute of Australia (REIA) showing an improvement in housing affordability is a positive sign for homebuyers, as cheaper housing in the market and lower interest rates will have a two-fold benefit to buyers. Housing affordability calculates the amount of a family’s income that is needed to pay for home loan repayments.
“Whether we are in a recession or in a bull market, there are always bargains to be had in the housing market,” added Robert Caulfield. “But we are currently seeing a very positive period for first homebuyers, where they will now be able to enter the housing market confidently and reap the benefits of the first home buyer grants from the government, lower interest rates and cheaper sale prices of houses.”
Robert Caulfield also said that this is a good time for homeowners to renovate their homes, as price of borrowing for renovations has become that much cheaper. In fact, most major banks across Australia have announced they will pass the rate cut in full to their customers. Renovating one’s home can significantly add market value to it, and also generally improves the living conditions within them.
“But it is always prudent to get the best expert help when renovating, or in the case of buying a house, pre-purchase inspections are essential, as they can save heaps of money in the long run,” he added.
Allan Oh, a housing expert at Archicentre, also points out that the current cut in interest rates will mean that the level of competition between first home buyers will help buoy the housing market and will keep prices healthy in the vendor market of houses valued under $500,000.
“We will probably not experience a big spike in the housing market, but it will help keep things ticking along at a time of pervasive economic and financial crises,” added Allan Oh. “This drop in interest rates and the current state of affairs in the housing industry will also prove to be a big boon for property developers across the country, especially in the mining cities and in Melbourne where the demand for housing is still quite strong, especially from migrants.”