According to a recent report on the Bloomberg news network house prices fell for the fifth straight quarter in the run up to May. They also reported that an index measuring prices across 8 of Australia’s major cities has dropped 1.1 per cent last month and has fallen 4.5 per cent since April 2011. To all intents and purposes it seems that our housing market is going to continue its slump for at least a few more months.
However, in the last week many of the banks and lenders around the country have slashed their interest rates in an effort to revitalise the flagging market. Lenders like the Reserve Bank have made a 50 point basis point cut to the official interest rate and many others are expected to make similar cuts in the coming months. Many have already cut interest rates in the alst year but are expected to do so again. Previously one of the key problems stopping Australian’s getting on the property ladder was the higher than average mortgage rates we ended up paying; we actually pay more on average than any other modern country for our mortgages. With this seeming to come to an end though now is looking like a much more attractive time to invest in property.
For first time buyers the market is still tricky as if the slump continues people could end up wishing they had held off. However, it seems probable that the market will begin to pick up in the coming months as the new interest rates begin to take effect. At the same time in many areas and cities across the country there is a shortage of rental properties and in some areas renting now costs more than a mortgage; meaning first time buyers might actually save money by buying property.
For investors though the property market is looking increasingly ripe as demand for rentals is at an all-time high meaning it is easier to ensure a higher return on investment for properties. We cannot expect the property market to fall considerably in the years to come and it is more likely that when it does bounce back prices will return to their pre-recession levels and continue to rise. This is already happening in many countries around the world where property prices sank marginally or majorly throughout the recession. Investments in property are always a lucrative one as they provide a long term income. Understandably investors are still worried about the long term housing market prices and are worried that investing now means they will miss out on a cheaper property in a few months’ time. However, the truth is that the market already is at a low point and many people are desperate to sell. This means you can still secure a price below current market rates and still have ample wiggle room should the market flounder. The reality is though that the market is unlikely to continue to decline and these rate cuts should start the market picking up or, at the very least, stabilising.
Overall this is making the property market tempting for investors. In the coming months if more investors start to look at property then it is likely the market will begin to recover and grow. The key is that as soon as investors start realising the potential for the property market it will grow with the impetus being on investment based property purchases as much as individual consumers. Undoubtedly rentals will remain high among nervous consumers but for investors things are looking up.