Mercia | Taxation, Business & Finance Advisers

Fixed Interest Rates Fall as House Prices on the Rise 

With fixed interest rates now falling below 6%, the long-term outlook for interest rates remains very positive and should give investors more confidence in purchasing properties.

Fixed interest rates are generally a forward indicator of the general direction of interest rates and over the last several weeks, they have been declining quite rapidly.

According to Brad Seymour, Head of Marketing and Retail at Yellow Brick Road Wealth Management, interest rates are now at their lowest level in several years.

“Overall, we are entering a period of very low interest rates which is further underlined by the fact that the Reserve Bank cut official rates again during October.

“With indications that the mining boom may have ended, the Reserve Bank is now cutting interest rates to encourage activity in the residential property market which is good news for investors.

“As a result of these low interest rates, Yellow Brick Road has recorded a surge in demand for low interest home loans from property investors,” he continued.

Paul Bennion, Managing Director of leading property depreciation specialist, DEPPRO added that strong population growth rates in recent years have also contributed to high demand for housing in many Australian states.

“For example, during the March 2012 quarter, the population of Australia surged by over 300,000 persons, with the largest increase in population occurring in Victoria (82,500 persons), followed by Queensland (76,400 persons), New South Wales (73,500 persons) and Western Australia (73,300 persons),” Bennion said.

Housing Report Highlights shortage crises in homes  

A new report from the National Housing Supply Council has highlighted the shortage in housing across Australia, particularly in New South Wales (NSW), Queensland, Western Australia and the Northern Territory.

In its June 2012 report, “Housing Supply and Affordability – Key Indicators 2012”, the Council estimates that the cumulative housing shortage since June 2001 has increased to nearly 230,000 dwellings.

Areas of acute growing shortage include Queensland and NSW, where there was virtually no undersupply of homes 10 years ago. According the Council’s report, NSW now has an estimated shortfall in properties of 89,000, followed closely by Queensland, with an estimated gap of 83,000.

Paul Bennion, Managing Director of property depreciation specialist, DEPPRO said the report should give confidence to both investors and developers, with evidence of long-term demand for property across Australia.

The property market has been relatively depressed over recent years in areas such as Queensland, due to the impact of very high interest rates and the high Australian dollar,” Bennion explained.

High interest rates have discouraged the construction of new homes, resulting in a growing undersupply of housing in populous states such as NSW and Queensland.

With interest rates now falling, there is every prospect the demand for housing will increase. If interest rates continue to fall sharply, then the affordability of homes will increase and as a result, there could be a major rebound in the property market within a short period time,” he said.

The National Housing Supply Council report on housing shortage can be downloaded at www.nhsc.org.au/content/publications

Source: National Housing Supply Council estimates of underlying demand; National Housing Supply Council estimates of dwelling completions net of demolitions and adjusted for unoccupied dwellings.

Depro is Mercia’s preferred Depreciation Report Provider

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