How will the rate cut affect investors?

rbaIt didn’t take long for the predictions to start rolling in – less than a day, in fact.

When the Reserve Bank cuts interest rates this low, you can bet that every economist and market expert worth his salt is going to make a prediction about what impact a rate cut will have on property prices.

According to the Fin Review, Tuesday’s news could prompt “the biggest building boom in Australian history is going to accelerate, predicts BIS Shrapnel”.

The article reports:

The number of dwellings built this year could come close to 200,000 for the first time, the property forecaster said, beating the previous record of 187,000 in 1994, when the economy was recovering from a recession.

“We were saying something in the low-mid 190,000s,” BIS Shrapnel associate director Kim Hawtrey said. “Now we’d be saying something in the upper 190,000-level.”

So what does this mean for investors?

A boom in housing construction means that some areas are going to be oversupplied. That’s not to say that all of Australia will be oversupplied – or even that any parts will be. But certainly, the gap between supply and demand will be bridged in specific areas and this may have an impact on property prices in those suburbs.

This many impact you directly; it may not. As an experienced investor who is accustomed to doing thorough due diligence before you shop for property, you won’t know until you start researching your next deal!

There is one thing that we know for sure. Anyone who has a variable mortgage is going to save some money as a result of this rate cut, as the banks seem to be passing on the full saving. That’s reason in itself to celebrate!

Til next time, happy investing!

Helen Collier-Kogtevs

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