The Australian real estate market was looking pretty rough at the start of this year, but conditions have now turned around.
Your Property Your Wealth director Daniel Walsh told Yahoo Finance that the federal election result, APRA loosening banks’ credit requirements both had a massive impact on confidence in the real estate market.
“If that wasn’t enough good news, we also had two cash rate cuts in two months, which sent [home loan] interest rates down to two to three per cent,” the buyers’ agent said.
All this has meant property buyers were able to borrow 15 per cent more now than last year.
“Lower interest rates also mean that saving your hard-earned cash in the bank is not so attractive, which will motivate more people to seek better returns elsewhere – such as through strategic property investment.”
The market is also forecasting Reserve Bank will make at least two more cuts of 25 basis points within the next six months. Some experts have even predicted the rate could go to zero.
“It’s possible that we end up at the zero lower bound. I think it’s unlikely, but it is possible. We are prepared to do unconventional things if the circumstances warranted it,” said RBA governor Phillip Lowe earlier this month.
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Walsh picked the Queensland capital as the Australian city now ripe for plundering by investors.
“I believe that between now and when interest rates hit zero that Brisbane will be the strongest market in the land,” he told Yahoo Finance.
My thinking is that the Brisbane market was poised to take off just before the APRA lending crackdown ground it to an unnecessary halt… Now that that handbrake has been released, it’s kicking into gear once more.”
As well as that growth potential, the current prices were more affordable than Sydney and Melbourne – plus Brisbane properties returned higher rental yield.
The Sunshine State is also welcoming thousands of new interstate migrants every month – and many of these new ‘locals’ have sold in the most expensive southern markets so have money to spend.
Despite the pick up in the real estate market, investors were warned earlier this month that any recovery would be gradual.
There is no sign of a ‘v-shaped’ recovery,” said CoreLogic head of research Tim Lawless.
“If values were to start appreciating rapidly, there could be a renewed round of policy responses aimed at keeping a lid on housing prices whilst at the same time, allowing low interest rates to stimulate the economy more broadly.”
Despite this, Walsh said the best investment results are achieved by those who act early.
“It’s early days yet, but the smartest investors are always the ones who make their move ahead of the pack.”