Is the cash rate pointing you toward Melbourne property?
In a media release from the Reserve Bank of Australia (RBA) on May 3, the official cash rate (OCR) has been cut for the first time in 12 months to sit at 1.75 per cent. This is a new record-low, down from the previous record of 2 per cent that was implemented last May. A drop of 0.25 percentage points is potentially fantastic news for home buyers who are looking to take out a mortgage.
Why could lendees see the benefits of this cash rate slash? The OCR is the rate at which banks and mortgage lenders borrow money from the RBA, meaning that a lower OCR saves them money in interest repayments. If the banks and lenders decide to pass on these savings to their customers, a mortgage for that dream house you've always wanted could be much more accessible.
What does the new OCR mean for buying a home in Melbourne?
In the past, the big four banks haven't passed on the savings of a reduced cash rate to their customers – although Housing Industry Association Senior Economist Shane Garrett believes they can't make this mistake again:
"On previous occasions, the main banks have failed to fully share the benefits of lower rates with their mortgage borrowers. We trust that such mistakes will not be repeated on this occasion. Housing affordability remains very challenging, and homeowners deserve to receive their fair share of [the] rate cut."
The Real Estate Institute of Victoria (REIV) President Geoff White outlines why Melbourne is the place to be for any currently cashed-up buyers in a May 3 media release.
"Median house prices across Melbourne are considerably lower than in neighbouring Sydney, offering buyers strong opportunities, even in the current market," he stated.
CoreLogic RP Data reports that the median house value in Melbourne is $831,100, compared to the lofty Sydney figure of $1,031,730. A saving of over $200,000 in the median value for a house makes Melbourne a very attractive option for buyers after something special in one of our biggest cities, and this lowered cash rate is a great place to start when it comes to obtaining the required funds.
The REIV media release also suggests that three of the big four banks have stated they will be lowering interest rates in line with the OCR cut. That's brilliant news, and private house sales in Melbourne could be on the rise in the very near future.
Where is the best place to buy?
We've recently gone over how strong the Melbourne market is compared with the rest of the country. It's also a growing and expanding environment to be in right now, as it continues on its projected path to overtake Sydney as Australia's biggest city.
A Melbourne buyer's agent is on hand at Cohen Handler to guide you through the entire buying process. Fantastic relationships with property agents mean our team has access to pre-market and off-market homes, which will give any client the edge heading into the offering process. Especially if you're looking to buy a house or apartment in a popular suburb such as St Kilda East.
Residex reports that the median house price in this suburb is $1,341,000, while the median unit price is only $512,000. Being so close to the CBD on one side and the ocean on the other, there is a real desire for buyers to be involved in this particular region. With competitive unit prices for entry-level buyers, and a slightly higher median house price for those after a different kind of lifestyle, mixed in with a potentially more accessible home loan landscape – St Kilda East might be experiencing a serious boom in the next few months.
Want to have a part of this for yourself? Get in touch with Cohen Handler today and take advantage of the current market conditions.