The decision of the RBA to cut interest rates this month will give a boost to the WA property market and help underpin home prices during the coming year.
This interest rate cut was the right decision to make taking into account the slowdown in the resources sector. Unemployment in Western Australia has been steadily rising over the past year due to this slowdown in the resources sector and the RBA has correctly recognized that the economy needs an additional boost through interest rate cuts to help create new jobs both here in WA and throughout Australia.
With property prices remaining generally steady in WA and in particular Perth, this cut in interest rates will mean that homes have become even more affordable.
While many first home buyers have been building new homes over the last year, this cut in official interest rates could see greater activity by first home buyers in the established housing market. This trend is underpinned by indications of a slowing in new land sales.
In addition, lower interest rates will encourage more established home owners to upgrade their homes as prices in the top end of the market are still very soft. Professionals Real Estate Group has already been recording greater activity by upgraders in the coastal market over recent months and we expect this trend to continue during 2015.
Even though rental returns have declined in recent months, this interest rate cut will encourage more investors to purchase property. This is because falling interest rates means that older Western Australians are achieving lower returns on their bank savings and returns from property can be much higher taking into account capital growth and rental returns. These very low interest rates should see strong activity by property investors in suburbs where the median house price is under $450,000 and where rents are relatively high.
With predictions that there may be additional interest rate cuts during the coming year, the outlook for the local property market remains very positive as interest rates play a decisive role in the housing market. Overall, Professionals is predicting that house prices will remain steady during 2015 due to continued historic low interest rates.