The currently low interest rate environment bodes well for the Australian housing market, according to federal treasurer Josh Frydenberg.
For Mr Frydenberg, a combination of incoming tax concessions and the historic low interest rate environment is the silver lining in a broadly tough economic environment.
“The combination of the government’s tax relief and the RBA interest rate cuts, though, provide a timely and important boost to household disposable incomes,” Mr Frydenberg said to Loan Market brokers at the group’s Game On conference in Tasmania.
Talking specifically about the property market, Mr Frydenberg projects that a range of government initiatives should act as stimulus.
“We’re helping first home buyers and downsizers, building infrastructure to boost housing supply, and providing support to homelessness services to help those who need it most,” Mr Frydenberg said.
In particular, the Treasurer highlighted the upcoming First Home Loan Deposit Scheme, which will be available from 1 January 2020 to allow up to 10,000 first home buyers a year to access mortgages from “selected banks and non-bank lenders.”
Those purchases will be able to buy their first home “with as little as a 5 per cent deposit”.
“We want to help Australians realise their goal of buying their first home by cutting years off the time it takes to save up for their deposit.”
Lower for longer
During a round of questioning, Mr Frydenberg suggested the record low rates could be here to stay for some time.
Though a low cash rate has the knock on impact of low interest rates for savings accounts, which is tough news for Australians looking to compound their capital, but cheaper access to finance through low interest rates on mortgages is a favourable outcome for property investors.
“This new environment, I think, will be with us for some time to come, and the Reserve Bank governor has indicated that he expects interest rates to remain low for some time to come,” Mr Frydenberg said.
“There has even been speculation of further interest rate cuts. That is obviously not good for depositors, people who are savers and have their money in the bank, but it is good for people entering the housing market, and no doubt, those lower interest rates may be part of the reason why we are starting to see a boost in auction clearance rates, which I understand that last week (in the cities) were above 80 per cent, which is concurrent with where it was a year ago,” he said.
You can read a comprehensive report of the Treasurer’s address here.