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15

May

2016

Low interest rates, what now?

We all know by now that the RBA recently dropped the official cash rate to a historic low of 1.75%. Market analysts are also predicting another rate cut later this year. So why is this happening and what does it mean for the property investor?

The why is fairly easy to answer. Our economy is struggling along with the rest of the world. Slow growth figures and deflation are not the makings of an economy doing well. Hence the RBA by lowering the cash rate hopes to generate more business confidence as well as give the populace more confidence to spend. More spending both by the individual as well as business investment starts to get the economy moving in a more positive direction which in turn will create jobs and opportunities. 

For the property investor, it can be a little bit more complicated depending on which side of the fence you sit. There will always be optimists and the pessimists in any defined group of people, but it is usually always the optimists who are making the money in property investment. Put very simply, lower interest rates will give most property investors more capital to work with as their portfolio interest rates go down. This in turn gives them more buying power to increase their investments in the property market. The other question of course is what will low interest rates do to the property market in general. Again there are lots of thoughts and speculations by many and varied so called property experts from both within Australia and those from overseas giving commentary on the prognosis for our housing market. Put simply, no one can guarantee what is going to happen. I suppose that is the beauty of taking a risk and investing in any venture.

One can as always mitigate a lot of the risks by researching thoroughly the investment strategy they will be using. Property investment is not a complicated process for those who are doing it right but does require a lot of time and effort in understanding the market place and in particular which certain suburbs are projected to increase in value more than others. Within the greater Brisbane area, there are still suburbs with housing priced around $300,000. Compare this to the average price in Brisbane, Sydney or Melbourne, and the numbers will speak for themselves.

I am still an optimist when it comes to the property market especially in Brisbane and its surrounds. The value for money compared with the other 2 major capital cities cannot be ignored. The smart property investors are taking advantage of this fact at this time. Even smarter investors rely on a reputable property management company to look after their portfolios, especially one that can look after multiple properties in various suburbs throughout Brisbane and its neighboring coastal areas. 
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