Low Interest Rates Promote Housing Market Recovery

Property market moves through cycles. You may think- Hang on! We aren’t being told this for the first time. No you aren’t. I am just taking this opportunity to reiterate the degree of truth in this statement. The market moves through crests and troughs and times of trough do not change overnight into peak or boom times. The graph moves gradually.

The global recession rubbed off on Australia too. We were looking really South back then. We may have received a breeze of hope here and there but altogether, those were despairing times. Australian real estate moved on slowly from there but for quite a while it remained a buyer’s market.

Year 2012 proved to be a buyer’s market

In fact, for entire 2012, the real estate market remained a happy hunting ground for buyers; with sellers willing to get rid of their properties at negligible profits. However, just as the “crest and trough” theory demands, those days changed. Now, we are looking at buoyant times ahead. The first sign is the dismantling of this buyers’ market.

Housing tempo has picked up

The tempo has really picked up and these are busy days once again for the agents and the Open Home organisers. House sales are at a high (selling at smart price stickers too), there are more properties coming under contract and buyers are willing to see many new opportunities at the horizon.

In fact, the single largest change has been one of perception. The sellers are no more inhibited in asking for a higher price and the buyers are not backing off from paying what they feel to be a “still-reasonable bargain” in light of the increased market tempo.

Auction clearance rates are high once again

Sydney is at the epicentre of a pleasant revival in the Prestige Market. In fact, the auction clearance rates are looking good for all the price hierarchies. Melbourne is running Sydney close in terms of auction clearances and 60%-75% clearance rates for these capital cities show nearly 20% hike in comparison to their performance same time, last year.

Low interest rate is at the back of the housing revival

In my opinion, and not many would argue with me here, the interest rates have been a powerful factor behind the change. It may not have begun the revival but is certainly playing its part in strengthening the housing boom. Cash rates are at their lowest and those critics who thought it might be a flash in the pan have eggs on their faces today.

The low interest rate climate has not only sustained itself but there is a great chance of further rate reduction by the last quarter this year. After all, with the low inflation rates persisting, government is in no mood to relent- it can actually afford to cut the cash rates even further by a few basis points.

Turramurra sellers may laugh all the way to the bank

Low and mid range housing segments are attracting a beeline of customers and Sydney especially has done really well in this regard. Well! For one, this news provides thumbs up to the properties in Turramurra, which are anyway selling quickly.

What do you think is the strongest reason behind the housing market recovery?