If you’ve been thinking about buying property, it might just be the time to make a move.
As 2010 draws to an end the forces underpinning Australia’s property markets appear to be aligning – offering opportunities for savvy property buyers willing to do the research and leg work.
Not much more than one year ago the Reserve Bank of Australia’s (RBA) official cash rate was still at a 49 year low of 3 per cent – compared to 4.75 per cent where it rests now.
As a result the cost of borrowing has increased substantially, with property buyers now lucky to find an interest rate much below 7 per cent.
While this might not sound like good news, there is a silver lining. Interest rates are stabilising, giving greater scope for borrowers to plan ahead with the knowledge that mortgage repayments are unlikely to rocket upwards any time soon.
Although the RBA will most likely increase the cash rate again next year to manage our strengthening economy, some commentators have claimed that we might not see any adjustment until well into 2011, and even then we are likely to be nearing the top of the interest rate cycle.
National Australian Bank chief economist Alan Oster recently said that he expects the cash rate to hold steady until May and peak, eventually, at 5.25 per cent.
“Clearly each RBA meeting will remain data dependent. That said, clear evidence of the income and investment effects of the mining boom and its inflationary potential are unlikely to be evident until mid-2011,” he said.
But it’s not only the stabilising interest rate cycle that potentially bodes well for property buyers.
Property listings are rising. Auction clearance rates however have been soft throughout the spring selling season and property prices are stagnant. In other words, we are in a ‘buyer’s market’ and clued in buyers should have a stronger hand when it comes to negotiating on price.
Furthermore, astute investors could capitalise on these softer market conditions to enter the market – and ride the potential capital growth wave upwards.
Keep in mind that market conditions will vary from state-to-state and market-to-market, and any purchase requires extensive research and consideration.
But if you’re an aspiring first timer, upgrader or simply keen to kick start your property investment portfolio, it might be time to do some ground work and consider your buying and borrowing options.