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Australia will see further interest rate reductions, according to Residex.
John Edwards, founder of Residex, said economic growth driven by housing investment is “not going to be the saviour of an economy that is transitioning from a mining boom.”
Australia needs to see small to medium business stimulated strongly and the RBA will be hoping that further rate reductions will have the required effect, Mr Edwards said in the August property market update, which was released yesterday.
“Further interest rate reductions will continue to work in the favour of investors as it will increase their capacity to buy and support higher valued homes,” he said, pointing out that this will continue to drive house prices up.
However, while a period of low interest rates is helpful to investors, the same cannot be said for first home buyers due to unaffordable housing prices. Mr Edwards said the result is that it is not first home buyers fuelling the current growth in housing values.
“Ultimately, it is not acceptable to create a situation for the current and next generation where housing has a cost that causes them to rent for their entire lives,” he said.