‘Amazing times’ for official cash rate

Expert Advice by Rich Harvey
20/03/2015

Despite the increasing price of Australian investment property, a leading real estate authority says property hasn't been this affordable ever before.

Malcolm Gunning, President of the Real Estate Institute of New South Wales, was commenting on the fresh announcement from the Reserve Bank of Australia (RBA) that the official cash rate is going to stay on hold at 2.25 per cent for at least another month. 

"It is really amazing times because the low interest rates mean that property has never been more affordable despite the high prices," he said in the March 3 media release. 

"However the reality is that as the economy picks up interest rates will rise and finance will be less affordable. It is so important to remember this," he added. 

So there you go, yet another month of interest rate stability to let you get ahead on the market and buy some fantastic investment property in Sydney. But what led to the RBA standing firm this time around, after dropping rates last month? 

Factors affecting the cash rate
In his statement announcing the new cash rate, RBA Governor Glenn Stevens said the Australian dollar has done as was needed and dropped against the US dollar, but still remained too strong against a number of other currencies. 

Other factors that will interest house hunters and other types of investor are credit levels. Stevens says there is moderate growth in the credit sector, while Sydney dwelling prices continue to rise. Commercial property was also rising in price, which offers yet another avenue for anyone looking at making some capital gains or positive cash flow through property. 

Be cautious, then get the cash flow
The low interest rate environment will be keeping buyers extremely keen, and it's crucial not to jump at the first home that catches your eye. Remember that while buying conditions are helped by the interest rate, rental yields are proving difficult in Sydney at the moment. The latest figures from CoreLogic RP Data has the gross rental yield for Sydney at 3.6 per cent – lower than the capital cities average and only Melbourne performed worse.

So you've got to be careful and engage a buyers' agent to find the right property, and perhaps think about ideas like adding a granny flat, or even buying new land and building on it if you want to take full advantage of this situation. It's all well and good to get a property, but to really get the full set of benefits that a property has to offer, you need to think carefully and weight up all your options. That's where the expertise of a buyers' agent will be your best friend in the market – talk to one today.

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Rich Harvey
Managing Director, propertybuyer
This article was written by Rich Harvey, founder and Managing Director of propertybuyer, Sydney & Australia’s most awarded Buyers Agents. Propertybuyer helps property investors and home buyers search and negotiate the right property at the right price, everytime.  For further details please visit www.propertybuyer.com.au or call +61 2 9975 3311 or 1300 655 615.


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Disclaimer: while due care is taken, the viewpoints expressed by contributors  do not necessarily reflect the opinions of Your Investment Property.

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