Analysis by the Reserve Bank of Australia suggests house values could jump 30 per cent over three years if borrowers believe the cut in interest rates is permanent.
An internal RBA document released on Friday in response to a Freedom of Information request says that while the RBA is on alert for current ultra-low borrowing costs inflating a credit-fuelled asset bubble, so far, the central bank believes lending standards are prudent.
While our financial regulators are ready to act if necessary, apparently they don’t see rising house prices as a major risk.
Part of the reason the RBA is comfortable is that currently much of the housing demand is coming from owner occupiers including first homebuyers, rather than investors.
he RBA recognises that low interest rates will lift asset prices, but they believe in turn will increase wealth and household spending.
If anything the RBA see the biggest risk to the economy being high unemployment, but they suggest our stronger household balance sheets from low interest rates could help counteract the danger.
But there’s more than low interest rates that are going to fuel our property markets this year…
The number of properties for sale in Australia is beginning to dry up.
Currently property buyers are heading back into our housing markets in droves, keen to get a foothold before property values surge.
But they are finding limited stock, with 7 of our 8 capital cities having significantly less properties for sale than 12 months ago.
Strong demand at a time of limited supply must lead to property price growth.
But don’t get lulled into a false sense of security by our rising property markets.
As always correct property selection will be critical for the long-term performance of your investments.
Location will continue to do around 80% of the heavy lifting, so don’t compromise.
You can’t expect to get top investment performance from a secondary property.
Article Source: propertyupdate.com.au
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