Here’s what lowering interest rates does to property prices

How low can they go?

Most of those working in the dismal science are calling for several more drops in the RBA cash rate, with some calling out a 0%.

Interestingly many of these same cats were talking about interest rate rises only 12 to 18 months ago.

The chart shows that falling interest rates do – eventually – help instigate house price growth.
Here's what lowering interest rates does to property prices
Since 1990 the official cash rate has dropped 44 times.

In April 1990 the cash rate was 15.5%.  Interest Rate

In late September 2019 it is just 1%.

For mine the cash rate will keep falling – at least two more times or by 0.5% in total over the next six months – in order to try and keep the Australian economy growing.

And of course, to help address the slide in housing prices.

Yet, how much impact this easing will have on house prices is questionable.

Next stop will be printing money and more shovel ready projects.

Road works aplenty; public sector bonuses galore and as many Adani’s as we can.

Damn the torpedos!

…..

Damn the torpedos is one way of saying ‘bugger the consequence’s or ‘burn one’s boats’.  It is also a great Tom Petty and the Heartbreakers album from 1979, where Tom’s intent was to ‘kill disco’.

Moreover, “Damn the torpedoes, full speed ahead!”, is a famous order issued by Admiral David Farragut during the Battle of Mobile Bay in 1864.  It is a paraphrase of the actual order, “Damn the torpedoes! Four bells. Captain Drayton go ahead! Jouett, full speed!”.

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Michael Matusik

About

Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive


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