At its first meeting for 2014 the Reserve Bank of Australia (RBA) decided to keep the official cash rate on hold at its record low of 2.5 per cent. This is great news for the Australia property market, as its 2013 recovery charges on. In his statement following the meeting, RBA Governor Glenn Stevens indicated that we can look forward to enjoying the current low interest rate environment for some time, stating: "On present indications, the most prudent course is likely to be a period of stability on interest rates." Interest rates have now been on hold since August last year, the longest period of stability since 2006/2007 when the RBA kept the cash rate on hold at 6.5 per cent for ten consecutive months. According to Housing Industry Association's Senior Economist Shane Garrett, "The RBA has emphasised the importance of stable interest rates at this time. Accordingly, we may be set for record low interest rates for a prolonged period". Other market analysts are predicting the official cash rate will remain on hold for the remainder of 2014 and suggest that those looking to invest in the property sector can expect the situation to prevail without interest rate rises, well into 2015. According to some market analysts, there may be even more good news on the horizon for property buyers later this year. Rising unemployment rates could influence the RBA to lower interest rates even further in late 2014. However, the RBA's decision will be determined by the performance of the economy as a whole and other indicators such as the level of the Australian dollar and inflation rate trends. In its statement, the RBA noted recent improvements in indicators of business conditions and confidence, saying the information becoming available over the summer suggests slightly firmer consumer demand and a solid expansion expected in housing construction. In the last three months of 2013, the construction sector continued its expansion with particular strength in new homes. This bodes well for improvement in first home buyer activity in 2014. According to the APM House Price Report December 2013, Australia's combined capital city median house price increased by 9.8% over the 12 months to December 2013. Melbourne and Sydney led the way in this recovery, with their growth likely to continue into 2014. Sydney enjoyed growth of 15.1% and Melbourne 8.6%. However, growth was slower in smaller cities and regional markets with all other capital cities only recording growth of 8.4% or lower, suggesting there may still be bargains to be had for those looking to invest, with plenty of funds available to qualified borrowers. The outlook for the property market in 2014 continues to look bright with both house prices and housing activity responding well to the low interest rate environment. Conditions are positive for first home buyers, investors and those looking to refinance in 2014. For more information about low interest rates in relation to your personal financial situation, please get in touch today. If you would like to discuss any of the topics outlined in this newsletter, or simply want to chat through your financial options for the month ahead, give us a call. Sincerely, The TAG Team
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