25 July 2024
The property market continues to be active, presenting many opportunities despite the unchanged interest rates last week. Initially, there was optimism that the Reserve Bank would relax its strict monetary policy and provide relief to consumers by beginning a downward interest rate cycle. However, inflation just hasn’t played along. It now seems that interest rate cuts will begin closer to the end of 2024.
According to David Jacobs, Regional Sales Manager for the Rawson Property Group, future interest rate cuts will have a ripple effect across the property market, easing the financial burden on existing homeowners while making home loans more accessible to new buyers.
“Current market conditions have been slowly stabilising, and consumer confidence post-elections has improved. Conditions are favourable for a resurgence in property activity, and that’s exactly
what we expect to see from here on out,” he says. When interest rates do drop, property market activity is expected to improve rapidly. While favourable conditions typically take time to translate into actual market activity, Jacobs believes the effects may be seen more quickly than normal this time around.
"We've seen a lot of pent-up demand building in the property market, particularly in the middle to lower price brackets,” he explains. “Future interest rate cuts and economic stabilisation could be the golden key that many buyers need to take the plunge into homeownership, without the constant fear of rates hikes hanging over their heads.”
Outlying areas set to benefit
While market activity is expected to be centred around major metropolitan areas, Jacobs says outlying towns and suburbs should also prepare for a surge in demand. “With the continued trend of remote and hybrid working models, we’re seeing a lot of buyers expanding their property searches to take advantage of the value for money and property gems available beyond the more central areas,” he says. “With the flexibility of remote work, it’s now possible to enjoy a great home environment in a ‘small town’ setting while still having a manageable – if slightly longer – commute to the office on the rare occasions that it’s actually necessary.”
Rental market reshuffle
“In general, we’ve recently seen a very positive performance from the rental market, with significantly improved tenant payment behaviour statistics,” says Jacqui Savage, National Rentals 
Manager for the Rawson Property Group. “It’s an extremely positive sign that tenants have been managing the pressure on their household finances so capably, but we are still hoping for additional relief provided by future lower interest rates which will certainly make a significant difference.”
Savage expects tenant payment behaviour to remain strong and affordability to improve, offering excellent opportunities to rental investors. She also expects some tenants to begin the transition from renting to owning their own property. “Navigating these conditions to minimise vacancies and optimise returns will require a careful and strategic hand from rental agents and their investors,” she says.
Smart Financial decisions remain critical
Despite the prediction of future interest rate cuts, Leonard Kondowe, National Manager at Rawson Finance, urges homeowners and property purchasers to remain conservative in their financial decisions.
"It's still crucial not to overspend in this economic environment,” he says. “Instead, use this opportunity to get up to date with any outstanding payments and avoid taking on any new high-
interest loans.” When interest rates do drop, Kondowe encourages existing homeowners to keep up with the higher bond repayments of previous months where possible. This, he explains, not only dramatically reduces the interest paid over the lifetime of the bond, but can also serve as an invaluable emergency reserve for bondholders with an access facility.
“As always, I’d also recommend avoiding a property purchase at the upper limit of your affordability,” he adds. “It’s always good to leave a little financial wiggle room to accommodate any unexpected bumps in the road.”
Lending appetites strong and stable
As for lending prospects, Kondowe says appetites remain strong and stable with qualified home finance applicants in high demand. “Lenders are pulling out all the stops to win over low-risk bondholders,” he says. “Applicants with strong financials are receiving excellent offers.”
For candidates with less pristine credit records, Kondowe says financial remediation efforts are paying tangible dividends in terms of bond application success rates and interest rate offers. The results are particularly evident when remediation is facilitated by qualified bond originators like Rawson Finance. “It’s a lot easier to fix the red flags in your financial profile when you know where they are, and what can be done about them,” he says.
