While the current record low interest rates have some discussing the potential for a return to a strong capital growth environment, there is still a missing link, according to RE/MAX.
Managing director of RE/MAX Geoff Baldwin has recently released a statement suggesting that it’s not just the cost of money, but confidence, that is required for a return to the boom conditions of the past.
Pointing to the 1988 real estate boom, he noted that interest rates were around 14 per cent and explained that the current expectations of a “stampede” to property are reasonable, with fixed rate loans currently available from 4.5 per cent. Yet this is only part of the picture.
“With rent returns remaining comparatively high, a low vacancy rate and an increasing number of positively and neutrally geared opportunities, all the boxes are ticked for investors to be very active,” Mr Baldwin said.
However, confidence is missing in the current market, stunting the potential for growth.
“Whether first home buyers, upgraders or investors, when confidence is low, so is activity - and right now in Australia, there exists a palpable lack of confidence," he said.
“Many put this hesitance down to the current negative political situation, while others say it is a hangover from the GFC or just a general mistrust of the market. However, one thing is certain, when it changes we will see a sudden lift in activity and prices will bounce.”
Mr Baldwin noted that after the election, positivity will re-emerge in the market, with spring also helping after the seasonal winter lull.