RETAILERS across the board from major chains like Harvey Norman to small speciality shops will be rejoicing at the Reserve Bank’s latest 0.25% interest rate cut — the first since April 2009, to 4.50%.
The Australian Property Institute Victorian president Steve Simpson said the retailers will be breathing a sigh of relief leading up the Christmas season.
“From the perspective of retailers, this interest rate reduction has taken a big pressure off the negativity and uncertainty in the market, which might also boost retail sales across the board as consumers start spending coming into the Christmas period,” he added.
However Simpson said the lower interest rate is unlikely to flow on to the leasing market where rentals have softened.
ANZ Research Ivan Colhoun has forecast another rate cut in February, however he warns this could just be a one-off.
“Though on current developments and our forecasts for inflation and GDP growth, this is a finely balanced call with the likelihood that this might be the first ever once-off rate adjustment.
“How consumer and business confidence responds to this interest rate cut will be very important in whether a further move is forthcoming from the RBA. Either way, we would not expect another move as early as the December meeting, barring very negative European developments.
“February would seem the first realistic option, as the RBA would be able to assess the confidence response to this rate move, have more information about global economic trends and how they are flowing through to Australia, and have one further CPI reading (early January),” Calhoun concluded.
Property research and investment firm Aviate Group’s managing director Neil Smoli said the case for investors remains much the same despite the rate cut.
He added that it generally takes more than one 25 basis point reduction to have a marked impact on the property market.
“The banks are offering variable rates still hovering around the 7% mark. It’s not until they drop into the 6% to 6.5% range that a marked impact on the property market can be distinguished.
“From an investment perspective, the reality is the current economic environment lends itself to a property purchase irrespective of the rate decision, because other influences like prices, income levels, employment figures and rental yields all favour investors at the moment anyway.
“The banks themselves had already hinted at a downward movement in rates, having lowered fixed interest rates in recent times. Some astute investors were already active in the market in anticipation of this, and this latest announcement should do little to discourage others,” he concluded.
Australian Property Journal
