Herschel Jawitz, CE of Jawitz Properties has welcomed the 50 basis points cut by the Reserve Bank as both needed and appropriate to current conditions.
With slow economic growth and inflation hovering below the top end of the target range, there was good reason to support a drop in interest rates by at least 50 basis points. Jawitz believes that the rate cut will provide a welcome boost to the residential market which continues to show good resilience and for the first time since 2008 is offering home owners real increases (after inflation) in property values.
“The USA is a case in point where long term interest rates on mortgages have fallen to historic lows of around 3.9% for a 30 year fixed mortgage with a five year variable rate mortgage closer to 2%. Even with a slow US economy, the low house price and current interest rate environment are benefiting the residential market as home sales start to show a sustainable recovery,” he says.
“Despite a slow economy and slow job growth, the cut in rates will boost consumer confidence and affordability especially at the lower and mid-level price ranges. Whilst there is no doubt that the market has turned from a price point of view, this decrease will provide a much-needed impetus to speed up price growth,” he says. Price growth will still in all likeliness remain subdued but resilient and buyers will need to realize that there are shifts and that they won’t have it all their own way for much longer.