A Property blog by Paul Bennion.
Perth is one of the best placed property markets in Australia to take advantage of the latest cut in interest rates by the RBA.
The decision by the RBA to cut interest rates at its August meeting will give a boost to the Perth property market and help underpin home prices during the coming year.
Property prices in Perth have undergone a major market correction over the past two years. The latest REIWA figures for the June 2016 quarter show that the median house price in Perth fell by 4.7% to $522,500.
With property prices now highly competitive in Perth, this cut in interest rates will mean that homes have become even more affordable.
Currently, around 50% or half of all house sellers in Perth are reducing their listed price to achieve a sale.
Compared to Sydney and Melbourne, property prices in Perth are now very affordable and this latest interest rate cut will encourage more property buyers to take advantage of these bargain basement prices while they last.
Property investors from both Perth and inter-state will now be targeting the Perth property market due to the very competitive property prices that currently exist in the city and also by the belief that the local property market has now nearly reached the bottom of its current cycle.
DEPPRO has also seen evidence of this trend with an increase in tax depreciation report for investors buying property in Perth over the past two month especially by mature investors.
Falling interest rates means that older Western Australians are achieving lower returns on their bank savings and returns from property can be much higher taking into account capital growth and rental returns.
This cut in interest rates comes at a time where there are signs that the WA economy is beginning to bottom out. Commodity prices have begun to stabilize and strong Government expenditure on infrastructure is helping to create much needed jobs in the economy.
This resilience of the WA economy combined with record low interest rates will encourage first home buyers and upgraders to move back into the Perth property market over the coming year.
While many first home buyers have been building new homes over the last year, this cut in official interest rates could see greater activity by first home buyers in the Perth established housing market. This trend is underpinned by indications of a slowing in new land sales.
In addition, lower interest rates will encourage more established home owners to upgrade their homes as prices in the top end of the market are still very soft.
With predictions that there may be additional interest rate cuts during the coming year, the outlook for the local property market remains very positive as interest rates play a decisive role in the housing market.