Board Leaves Interest Rates Unchanged: What Does This Mean For Investors?

Board Leaves Interest Rates Unchanged: What Does This Mean For Investors?

During a meeting on February 4, 2020, the board has left the cash rate unchanged at 0.75 per cent as predicted by traders and economists. The RBA has remained reasonable after a tumultuous year in 2019 with US-China trade dispute, and now the coronavirus.

Their decision was supported by the labour market and inflation which saw national unemployment and inflation higher the past year. This is a huge sigh of relief for consumers carrying high amounts of debt. However, as the coronavirus outbreak continues to worsen and affect many global industries, trade flows and investment will remain stuck in uncertainty. Despite the virus being mainly in China, the global fear of an upcoming pandemic has affected business, travels, and many industries including real estate.

How Interest Rate Affects Commercial Real Estate

Since January 21 and the start of this week, mortgage rates have fallen almost every single day. Everyone is alarmed and the risks have made the stock, bond yields, and the oil price falls significantly. Whenever interest rates experience a rise and fall, it always affects the economy at large. This is especially true for commercial real estate. The unchanged interest rate is good news for any person, business, or corporation with loans, especially for real estate investors whose rates are low and will remain low. This also means they have more money to expand their investments and become more active in taking advantage of their financial savings. Low or unchanged interest rate will mean more people will continue to purchase properties in 2020.

What Should Investors Focus On?

By now, we all know that there’s a direct effect on the value of commercial real estate with the status of interest rate on Treasury bills and interbank exchanges. This rate will affect not only mortgages but also capital flows, supply and demand for rates of return on investment, and property prices. For investors, falling property prices can be good or bad news. Slow global growth and a year-long downturn in house prices can mean a loss in economic momentums. However, the low-level interest rate can be good for the Australian economy.

This year the Australian dollar is at its lowest level over recent times. Forecast in the unemployment rate for the year 2021 is 5.2, which is considerably higher than in 2019 which was 5.1. The interest rate, however, will remain stable and GDP will climb a little higher. While the inflation rate is projected to rise to 1.9 by 2020. So what should investors do this year?

Researching Well Before Buying Investments

Real estate will always be a lucrative investment despite the rise and fall of interest rates and it’s something investors have always considered. However, during disasters that have a huge economic impact, investors should take more time in knowing their own market before purchasing a real estate investment. The latest coronavirus outbreak has had a significant effect on the Chinese economy—Australia’s largest trading partner. Experts are still worried about how huge the impact will be but as China buys one-third of Australia’s goods and services, the virus will severely impact the nation’s valuable sectors.

Checking the latest mortgage rates and finding out the competitive rates is a great start to make sure you’re always getting the best investments in your area. It’s also wise to learn strategic techniques when investing. The advice “buy when it dips, sell when it rises” is what good investors often follow. However, before making huge investments, it’s always wise to seek professional investment advice first. Talk to your advisor about your goals and our current financial situation and make decisions that are smart and safe.

Interesting in Starter Homes

Despite the circulating rumours that millennials aren’t buying homes, the truth is they are.

More and more millennials are now getting married, starting families, and looking to buy homes thisAnd with the unchanged interest rate, we’ll probably see more of them investing in starter homes this 2020. A rise in buyer activity will bring improvement in household wealth. The millennial population will create record level demands for apartments and units, and also a steady stream of tenants to occupy dwellings.

Take Advantage of Low-Rate Loans

When it comes to the rate cuts, there is a bit of good news and bad news for investors—and it all depends on their financial goals. The talk of an impending recession is increasing since the start of the year. Experts are worried about a possible downturn. Still, optimistic investors believe there is no need to panic, as they claim 2020 will be a great year for commercial real estate investors.

If ever things take a drastic turn and we go into another recession, taking advantage of low-rate loans to finance properties is a great way to increase your savings for the years to come. In fact, a recession can be the best time to invest. Falling asset prices means investors are forced to sell. For the next few years, it’s incredibly important to find balance and stay positive during fluctuations in the economy. The last thing we need is needless anxiety and irreversible mistakes brought by fear.

Regional Properties

Property prices constantly fluctuate regardless of location. As early as October 2018, Australia has already seen the drop in house prices in two of its most popular real estate locations: Sydney and Melbourne. Whereas the regional property market is experiencing a big growth in Australia in the past few years.

Primarily caused by expensive urban homes in the cities, a large percentage of investors turn to regional centres for more opportunities and investments. This has significantly transformed the local economy of regional cities and towns which has made them more accessible for jobs and diversification. Another important factor that’s attracting people to invest in regional Australia is the slower pace of life and lifestyle it provides. Homes with large backyards and affordable prices make living more fun in the regions than in the city.

References:

1. https://www.rba.gov.au/media-releases/2020/
2. https://www.theguardian.com/world/2020/feb/05/coronavirus-global-economy
3. https://www.nytimes.com/2020/01/29/business/federal-reserve-meeting.html
4. https://money.com/mortgage-rates-coronavirus/
5. https://www.abc.net.au/news/2019-01-15/china-economy-slowdown-will-affect-australia/10716240