Interest rate cut a win for struggling WA property market

Interest rate cut a win for struggling WA property market

THE property industry was quick to welcome the Reserve Bank of Australia’s (RBA) interest rate cut, calling it a win for WA’s struggling real estate market.

Reiwa president Damian Collins said the 0.25 per cent decrease would reduce financial pressures for current home owners and encourage new home buyers to enter the market.

He called for all lenders to pass the rate on to their customers.

“By banks passing the full cut on to their customers’ home loans, borrowers can expect for each $100,000 borrowed, annual payments will decrease by $250, making it more affordable to hold on to properties,” he said.

“For current home owners this will help people stay on top of mortgage repayments and also lower cash out -of-pocket expenses, which will mean more money to spend in other areas that will help boost the economy, or pay down existing debt.”

RBA cuts rates to record low

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The decrease could encourage new home buyers to enter the market. Picture: iStock

Mr Collins said the rate cut, along with other recent changes would be beneficial for first-home buyers.

“With the number of first home buyers decreasing nationally by 19.7 per cent in the first quarter this year, the RBA cuts as well as the proposed APRA changes to servicing rates, the Federal Government’s proposed first home loan guarantee scheme, and recent Keystart changes will all make it easier for first-home buyers to get into the market,” he said.

“With more West Australians able to access home loans, property investment and home ownership will become more affordable, which should help stimulate our local property market.

“We are already starting to see signs of this with an increase of 14 per cent in sales activity since the election – a shift we are keen to see grow momentum in the second half of 2019.”

The Urban Development Institute of Australia (UDIA WA) said the rate cut was a timely move that would benefit the struggling property market as long as the banks passed it on.

“WA has been wearing the pain of monetary policy decisions made to address economic and market conditions on the east coast for too long,” chief executive Tanya Steinbeck said.

“With our property market needing further stimulus to get going, this move by the RBA needs to be followed through by the big banks.

“One of the biggest contributors to the continued market downturn in WA has been the excessively tight lending criteria that banks are insisting that home loan applications meet.

“We can only hope that if the banks pass on this official cash rate cut, in combination with the potential for loosened mortgage rules flagged last month, we will see more positive movement in terms of demand for property as consumer confidence is bolstered.”

The rate cut will benefit the struggling property market as long as banks pass it on.

Ms Steinbeck agreed the cut, combined with other recent changes and state and federal government policy announcements would support a market recovery.

“WA is on the precipice of a property market recovery and it will take all stakeholders including government, banks and industry working together to create a supportive environment for growth,” she said.

“More people buying property and supporting the housing market recovery will have a positive flow on effect to the rest of the economy.”

What the agents say:
Harcourts WA chief executive Paul Blakeley
Buyer enquiry has been patchy in recent times and there has been some uncertainty as well as low consumer confidence around the real estate market.
This announcement is just the tonic required to help further stimulate interest the Perth property market.
When you add this to the re-election of the coalition, the improvement in the local economy, improved job confidence and an easing in the banks’ lending criteria after the initial findings of the Royal Commission, the future of the property market looks positive for the remainder of this year and beyond.
I think the first-home buyer markets will see the most immediate benefit, properties in suburbs with values under the $500,000 mark will see an increase in activity.
Prices in these areas are already at attractive levels, this interest rate reduction is just that extra sweetener required to stimulate enquiry, enabling buyers to take advantage of the most affordable property prices in years.

Peard Real Estate chief executive Peter Peard
I think cheaper finance is great news for many and certainly, the cut will give a boost to consumer spending but it’s hard to say whether it will have a significant impact on our market.
I think the WA market will need a lot more than a rate cut to kick start it. Employment and population growth will be the driving factor for recovery in 2020 and we’re already seeing evidence of this.
The biggest winners of the rate cut in the short-term are likely to be first-home buyers.
Not only will they pay less for a new mortgage with the prices at an all-time low, but they will also be securing a bargain.
Along with the proposed APRA changes and First Home Loan Deposit scheme, first-time buyers have a lot working in their favour.
Suburbs with median prices less than $500,000 where first-time home buyers are more active will benefit from the rate cut, particularly those less than 10km from the city such as Nollamara in the north and Belmont in the south.

Realmark managing director John Percudani
The interest rate will have a direct impact on the property market in terms of both owner-occupier and investment buyers across the residential and commercial sectors.
Many suburbs will benefit, especially those where there is activity by investors, first-home buyers and affordability sectors. These will be highly sensitive to these changes.
With the combination of the reduced interest rates and APRA changes along with the emerging favourable post-election sentiment we predict to see a positive outcome not only for the property market but for the overall WA economy.

What the broker says:
Resolve Finance managing director Don Crellin
With the major banks passing on these cuts, albeit at varying levels, and APRA moving to scrap the 7 per cent qualification buffer on residential home loan assessments, the timing is ideal for home buyers to qualify for a loan.
It remains important for the borrower to factor in future changes to the interest rate and ideally work with a broker to navigate best options.
But for those in the position to buy a home – now is a good time.
There’s no doubt that we’ll also expect to see this positively impact current homeowners looking forward over the next few years.

What the builder says:
ABN Group managing director Dale Alcock
This rate cut is a very positive sign for prospective home buyers who can feel confidence in entering the housing market.
It will give them the much-needed break that they have been waiting for to leap into the housing market at a very competitive time.
Many more Australians who have been ready to buy a new home, will now be able to secure the dream of home ownership.