The Reserve Bank of Australia left the cash rate at 2 per cent for the seventh month in a row on Tuesday, but left the door ajar for a further cut in 2016. Your Investment Property Magazine suggest that “While the Reserve Bank is likely to welcome a slowdown in the rate of home value appreciation, the overriding objective would be to avoid a significant downturn in the housing market, which would act as a weight on economic growth and potentially impact financial system stability.” With the current low interest rates on offer from many Australian lenders likely to alleviate some of the RBA’s concerns, they believe that rates are currently low enough to stimulate activity in the property market. That’s good news for home owners.
But what is in store for NSW’s property market in the long term?
Michael Yardney from Business Insider Australia notes that after a number of boom years, Australia is now entering a more mature stage of the property cycle. He gives the following reasons as to why property in Australia won’t crash:
1. Robust population growth fueled by immigration and to a lesser extent strong natural population growth. While immigration levels have dropped, we’re still growing at a faster rate than any other country in the developed world.
2. A healthy economy that, while slowing a little, will continue to perform at a level that is the envied by of much of the Western world and will create jobs for anyone who wants one.
3. A sound banking system with reasonable interest rates, tight lending practices and low default rate.
4. Business confidence is rising as we seem to have a stable government at both the Federal and State levels.
5. Consumer confidence has been rising since Malcolm Turnbull was elected Prime Minister.
6. A healthy level of household debt. Sure we are borrowing more, but the debt tends to be in the hands of those who can afford it. Many Australians are saving more, taking on less credit card debt and paying off their mortgages faster than they need to which improves the state of their personal finances. This in turn reduces the risk of house prices collapsing if interest rates rise or the economy hits a speed bump.
7. A culture of home ownership – seventy per cent of us own or are paying off our homes. In contrast to some overseas markets Australians have high equity in their properties and a conservative debt position. In fact half of all homes have no debt against them.
But he does predict that property prices will slow in 2016 and move from a seller’s to a buyer’s market. That’s good news for those us looking to buy in the New Year, but not so great if you are wanting to sell. Read the full story on Business Insider here …
What do you think? Will prices in NSW, and Sydney in particular, drop or hold steady in 2016?
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