As the first home owners grant boost starts to phase out, the banks may determine whether the current property market revival can be sustained, according to First National.
“With prices stabilising and consumer confidence high, the only thing that could stop the recovery continuing and strengthening, would be the banks increasing their variable rates either with, or ahead of, the Reserve Bank increasing their rates,” First National’s chief executive officer Ray Ellis said.
In August, banks were quick to raise the fixed rates ahead of the reserve bank’s announcement it would hold interest rates until at least early in 2010.
But as pressure mounts on governments to rein in their support of the banks, there is speculation the banks will increase their rates early to offset any potentially negative impact from this move.
Mr Ellis said if first home buyers stop buying, there is potential for the emerging property recovery to stop or even reverse unless other market segments are stimulated.
“There are signs throughout our network that second and third home buyers, including investors, are taking advantage of current conditions, helping push prices up as they go,” Mr Ellis said.
“But, the threat of rising interest rates may impact on this promising trend.”
Since the grant and boost were introduced in September last year, more than 59,000 Australians have taken advantage of the highest levels of housing affordability since 2002.