A big week for Australian property economics

house keyIt’s been a big week for the Australian property market with the announcement of a rate cut, as well as some good news from the latest Federal Budget.

Last Tuesday, the Reserve Bank cut the official cash rate by 25 basis points to the record low of 1.75 per cent, the first rate move seen since May last year when rates were also cut by 25 basis points. Economists are predicting that rates still have lower to go though, and that we might see another rate cute before the year is out.

But that’s not the only good news for mortgage holders this week, with some positives to also come out of the Federal Budget.

Many are breathing a sigh of relief to hear that negative gearing and capital gains tax concessions have been left untouched.

Superannuation tax concessions on the other hand have been tightened, including for those with taxable ­incomes of more than $250,000 a year and with super balances of $1.6 million and above. While the changes in super aren’t likely to see people rushing out to change their investments, some super funds may be redirected into negative geared property. 

The combined force of interest rates, negative gearing and super tax is likely to strengthen the Australian property market, with house prices predicted to steadily rise over the coming year (though still nowhere near as much as the overheated market we saw last year thanks to macroprudential measures).

First home buyers may have been disappointed by the latest budget, however low interest rates might help make it easier to break into the market.

A full 25 basis reduction in rates equals a $72 a month saving on a $500,000 loan, bringing the average standard variable home loan rate down to 4.52 per cent, according to Canstar. 

However, keep in mind that not all banks will necessarily pass on the full rate cut so have a chat to the team at Professionals Finance to find out who has passed on the cut and where you can make the most savings.