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Autumn Shaping up for Solid Selling Season

By Anqi Wang

With its March announcement that the official cash rate would once again remain on hold at 2%, the Reserve Bank (RBA) has now held a wait-and-see position for ten straight months. The accompanying statement indicated the central bank may now be a step closer to another cut, a view supported by many economists who are predicting at least one more reduction before the end of the year.

Interestingly, comparison website’s late February survey of 31 economists revealed two out of five believe lenders will increase home loan rates this year, outside of any official movements. During February alone, three lenders had already increased their variable loan rates, with the major banks expected to follow the trend.

February also brought another round of property bubble doomsayers to the headlines, with London based Jonathon Tepper leading the pack with his predictions of 30%-50% price falls. But many other analysts were quick to disagree, saying Australia does not have a property bubble and that significant price falls are highly unlikely.

In fact, the inaugural CoreLogic-Moody’s Analytics Australian Forecast Home Value Index showed accommodative policy, robust rental growth and a recovering labour market is likely to support Australian property values over the medium term. The report includes predicted price increases of 7.2% in Melbourne, well ahead of the 2.2% expected in Sydney. In line with these predictions, Melbourne is recording its strongest auction results since winter, with Domain reporting clearance rates of around 75% throughout last month.

In other property-related news, the debate over negative gearing was reignited in February by Bill Shorten’s announcement that Labour will abolish negative gearing if elected, while reducing capital gains tax concessions on property. Malcom Turnbull called the policy disastrous, predicting the price of property would be decimated. But independent modelling by the National Australian University has dented the Liberal attack on the Labour move, finding instead it would generate billions of dollars for the Commonwealth, with the vast amount coming from the top 10% income earners who negatively gear their properties.

With signs looking positive for a strong autumn season, vendors considering a 2016 sale will have ample opportunity to transact with willing buyers in the current environment.

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