While some believe the current record low interest rates may create another property boom, records show it is not only the cost of money that boosts the market, says managing director of RE/MAX WA Geoff Baldwin.
“The 1988 real estate boom started when interest rates were hovering around 14 per cent, so with fixed rate loans currently available from as low as 4.5 per cent, it would be reasonable to expect a stampede to property”, Mr Baldwin, whose company, RE/MAX WA, recently won the Best Training category at the Australian Real Estate Awards, said.
“With rent returns remaining comparatively high, a low vacancy rate and an increasing number of positively and neutrally geared opportunities, all the boxes are ticked for investors to be very active. However, the one missing link is confidence.”
Mr Baldwin said regardless of who the buyer is, when confidence is low, so too is activity. And in Australia, there is a “palpable” lack of confidence.
“Many put this hesitance down to the current negative political situation, while others say it is a hangover from the GFC [global financial crisis] or just a general mistrust of the market. But one thing is certain, when it changes, we will see a sudden lift in activity and prices will bounce," he said.
“Most informed projectionists are in agreement that the Australian property market is affected by elections. So if you accept that the upcoming election will clear the haze that has been present since Julia Gillard kicked off the world’s longest election campaign, you will also acknowledge that a new positivity will return after 7 September."
Mr Baldwin added that spring motivated activity each year after the traditional winter lull and could be the last opportunity for buyers to take action at today’s prices.