Cash rate changes are not the sole driver of the movement of property prices, according to a new study by the Property Investment Professionals of Australia (PIPA).
The study found that the strength of the current housing market conditions is brought about by a range of factors, contrary to the popular belief that the low cash rate was the predominant driver.
"The current market conditions are unusual, given markets are rising in lockstep around the country, but this is predominantly due to extremely strong demand from buyers and a low supply of property for sale, rather than the fact that the cash rate is really only marginally lower than it was before the pandemic hit," said Peter Koulizos chairperson of PIPA.
Koulizos said the movement of property prices is determined by several factors, including demand and supply, strength of the local economy, and migration patterns.
"Supportive lending conditions are also vital because if good borrowers can’t access finance to purchase properties — like what occurred from 2017 to relatively recently — then there is less competition for dwellings, and prices remain subdued,” he said.
The study showed that there were instances in the past when prices did not dramatically rise amid the low-rate environment. For instance, when the cash rate was just at 1.5% during the period between September 2016 and September 2019, capital cities only posted a 1.24% increase in prices.
"Sure, sometimes prices in some locations might start to strengthen at the same time as interest rates are low, but this is usually due to a number of other economic factors being in play, such as strong population and jobs growth, or simply more demand than supply," Koulizos said.
Gerv TacadenaNews Writer, YourMortgage.com.au, YourInvestmentPropertyMag.com.au at Key Media
Gerv started his career as a science and technology reporter working in a busy newsroom. Prior to joining Key Media, he was a journalist for some notable business news sites and magazines, particularly in Singapore, Canada and Hong Kong. Since 2018, Gerv has been writing breaking news and feature stories for Your Mortgage and Your Investment Property websites. He also occasionally contributes feature stories to Insurance Business America.
Collections: Mortgage News
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