A Finance blog by Paul Bennion.
The reserve bank’s announcements of rates cuts to an all time low of 2.25% is set to have an impact on Australia’s housing market.
The drop is the first announced by the Reserve bank with the last rate of 2.5% set 18 months ago in August 2013.
This drop saw a massive increase in housing purchases however; with house prices at a high this might not have the same impact this time around.
What does this Mean for the Property Market?
With housing prices on the rise, up to 14% in Sydney alone in the last 12 months the impact is yet again set to be felt across the real estate industry with the recent cuts.
It is predicted that property prices are set to steadily rise over the next 12 – 18 months especially in inner-ring suburbs. It is predicted that mortgage application will be on the rise and in turn demand for housing will increase.
Good News for Investors
Investors are most likely going to be the group that interact the most with the interest rates cuts. With the low rental yields the gross funding gap could be less than 1 per cent.
By investing at the start of the cuts investors can avoid the end of the rise in housing prices, which would push the gross return they receive down. Investing in suburbs of large cities could see a great return on investments.
What Next?
With 2014 being a somewhat turbulent year for the housing market it is predicted that 2015 will make steady gains. With less spikes in downturns and upturns property investors should take advantage of this.
Not only can the low rental yield fund great returns there are also other options for investors to increase the returns, such as tax benefits. Depreciation reports prepared by Deppro can offer investors guaranteed tax entitlements.
Contact one of Deppro’s tax depreciation specialists for more information.
