Debbie Shankar - 16 Jun, 2015

Increasing Property Prices and Decreasing Interest Rates Affecting Growth

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Property market pricing increases in Australia are being fuelled by foreign investment, which is said to be pushing first home buyers out of the market. According to economists, while the Reserve Bank of Australia (RBA) is trying to stimulate the economy by dropping the cash rate foreign investors are taking advantage.

First Home Buyers Struggle with Increasing Property Prices

Investors are buying up property across the nation. At auctions, investors are outbidding first home buyers with many focusing their efforts in Sydney and Melbourne where the greatest amount of capital growth is currently found.

For many first time home buyers this means they are having to look at alternatives. Instead of being able to purchase a house, which many prefer, they are having to buy smaller 2 bedroom apartments in outer suburbs for less. However, many of these properties have high prices in excess of $500,000.

The RBA’s Struggle with the Cash Rate

The RBA cut the official cash rate to a record low of 2 percent in May 2015. But, many economists are suggesting that while the Australian economy could benefit from an even lower rate to stimulate the economy, housing price inflation in Sydney and Melbourne is going to make it difficult.

What the Lower Cash Rate Means for First Home Buyers

A decrease in the official cash rate means that banks are now borrowing money at a reduced rate. This, in turn, reduces the risk for banks when they lend to households and businesses. Therefore, now is a good time to be looking to borrow if you’re a first home buyer. Borrowing now also helps to increase economic activity and stimulate growth.

Are you looking to buy your first home now? Then contact eChoice we can help you save.

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