Economists predict Australia’s property market is poised to get a boost from record low interest rates and a housing shortage that could lift prices by as much as 10% in 2013.
The RBA has cut the cash rate by 1.75 percentage points since November 2011 and traders are betting on a 50% chance the central bank will drop the rate a quarter-point to 2.75% by March, according to the Australian Business Information Service.
St George Bank economist Janu Chan told the publication that, while lower borrowing costs failed to stimulate demand in 2012, additional rate cuts and a constrained supply of homes will draw buyers back to the market.
“The two most recent rate cuts, and all the successive ones, should continue to feed through to the economy and have an impact, particularly on housing. There’s also the supply side — there’s been a long period of underbuilding in various areas.”
A decline in home prices is already showing signs of slowing down, with a mere 0.4% lowering in 2012 after a 3.6% drop in 2011, according to RP Data.
The median price for homes and apartments across the eight biggest Australian cities was $483,000 as of December 31. Sydney’s was the highest at $580,246, Melbourne’s median price was $500,000 and Perth’s was $479,000.