Over the past few years, it’s safe to say that interest rates have been near the front of everyone’s minds.
With a clear plateau in the Reserve Bank’s cash rate throughout 2024, there’s a clear stream of questions that might come to your mind…
What will happen with interest rates? Will they drop at all? If so, when?
It can be pretty easy to speculate and come up with ideas for what might happen. But as much as we do that, it won’t bring us any real clarity.
Instead, we like to listen to the experts…
And in this case, it’s the banks.
We’re pretty lucky in our country to have some well informed people and companies when it comes to economic forecasting and analytics.
Recently, all of the major banks in Australia came out with their forecast for interest rates through the rest of 2024 and into 2025.
CommBank and Westpac have both shared that they expect interest rates to begin dropping around November 2024, with further rate decreases estimated to occur once per quarter throughout 2025. A similar sentiment was displayed by ANZ and NAB, however they expect a first rate drop in February and May of 2025 respectively. All of them have concluded that rates should settle between 3 and 3.5% by the end of 2025 – which is far lower than the 4.35% we have seen throughout the first half of 2024.
So if all of the big banks expect rates to drop through 2025, what will interest rate cuts mean for the property market, and in particular – you as an InvestHer?
Well, to start the conversation off, do you remember throughout 2022 and the first half of 2023, when we saw interest rates rise from 0.1% to 4.1%? I think it’s probably safe to say that just about anyone who owned a house, or was looking to buy a home would!
These interest rate hikes put a huge amount of added pressure on mortgage holders – adding hundreds of dollars per month onto mortgage repayments, making the property market more difficult to get into. As a result, it slowed demand, reduced spending and slowed price growth in the property market.
So in short, when interest rates went up, property prices on the whole, went DOWN.
What does this mean with falling interest rates?
Plainly, you’d expect property prices to go UP.
As interest rates fall, it’ll open up more opportunities for people to afford a loan, ensuring that there’ll be a higher confidence in the general population’s ability to borrow and spend money. As a result, this will increase demand in the market.
And as we know from basic supply and demand principles, when DEMAND goes up (as a result of lower interest rates), and SUPPLY stays the same, prices are bound to go up.
What’s more, there’s another factor that will work to generate wealth for property investors throughout this time.
It concerns the existing issues we’re facing in Australia surrounding supply of quality property. As a country, we’re facing huge shortages of new properties, and will continue to throughout the remainder of the 2020s. This paired with the sustained growth that we’re continuing to see in the property market throughout 2024, it means that rate cuts will only make the market tighter to enter!
So, as we move closer to interest rates dropping, property will continue to become more expensive, meaning that the window to invest is wide open!
Want to learn more about strategic property investment in 2024? Check out the Blog HERE.
Otherwise, if you’d like to chat more about making the most of your opportunity to get into the property market – we’d love to hear from you!
Give us a call on 0455 223 865, or get in contact HERE!
