It’s the document that was never meant to see the light of day. But a Freedom of Information request reveals the Reserve Bank of Australia projects a 30% increase in house prices if interest rates remain low for the next few years.
The internal, not-meant-for-public-viewing analysis by the RBA looks at the impact of low interest rates on asset prices, including property.
The November 2020 document projects that housing prices could increase by 30% after about three years, so long as the official cash rate remains near record low levels (at or below 0.5%).
And that part of the equation looks promising, as the RBA board said they “weren’t expecting to increase the cash rate for at least three years” when they cut it to 0.1% in November.
What does this mean for property owners?
A lot more than just a potential 30% increase in the value of their property.
The RBA says both households and businesses can expect their borrowing capacity to increase, too.
That’s because low interest rates will lift asset prices (including property), which in turn will boost wealth, household spending and the value of collateral.
And as the value of collateral increases, so too will the borrowing capacity of households and businesses, the RBA document states.
What about prospective property owners?
With house prices projected by the RBA to rise 30% over the coming three years, it begs the question: is now a good time to jump into the property market?
Well, like most things in life, it will depend on your earnings, savings, borrowing capacity, goals, and where you’re at in life right now.
But it’s worth noting that there are a wide variety of generous federal and state government initiatives currently on offer, including the First Home Loan Deposit Scheme, HomeBuilder and stamp duty exemptions/concessions.
The quickest way to find out whether you can finance that home you have your eye on is to get in touch with us today – we’d love to explore your financing options with you.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.