Hard to support an interest rate cut in strong WA property market: Geoff Baldwin
While most other Australian states continue to experience a real estate lull, the WA market has bounced back strongly to the point where it is hard to argue the case for another interest rate cut.
I know there are many people who would argue with me on this point, but if real estate sales in the rest of the country were as strong as they are here in WA currently I’m sure the Reserve Bank board would not be considering dropping rates.
Of course, there are other sectors of our WA economy, especially retail, that do continue to need assistance to boost trade. However, the last thing we need in WA is for our real estate market to overheat.
The sub-$600,000 segment of the WA market has been strengthening for some time fired up by latent first-home buyer demand and this activity is now beginning to feed through to the higher prices as people upgrade to second and third homes.
Obviously, a strong property market is always a good thing, but a short term boom fertilised by “irresistible” interest rates can only result in another long period of stagnation such as the 2008 to 2012 down market.
History shows that when the property market is down, everything is down because when people see their home value affected they lose confidence and are much less enthusiastic about spending elsewhere so this is another reason to avoid a boom and bust environment here.
It’s a big call but, because the states can be so different economically there is almost an argument for rates to be adjusted to suit each market rather than a one size fits all approach.
Geoff Baldwin is managing director at RE/MAX WA.