Australians are “relaxed” about investing in their first property and are undeterred by possible interest-rate increases in a market where home prices are at a record, according to a survey.
The majority of those surveyed by Westpac Banking Corp., the nation’s second-largest mortgage lender, were confident in buying a property to rent out and would only reconsider their plans if interest rates climbed 2 percentage points.
First-time investors “do not appear to be overly sensitive to such increases, with their intention to invest only deterred by larger rate rises,” Martine Jager, the chief executive officer of RAMS Financial Group Pty, said in a statement. “Even if the rate direction changes suddenly, there could still be at least a year of strong demand left in the Australian property market.”
Spurring the rise in home sales are the lowest mortgage rates in almost five years, after the central bank cut the cash rate by 2.25 percentage points since late 2011. Investors are driving sales, with the share of first-home buyer mortgage approvals matching a record low of 12.3 percent in April, according to government data. It recovered to 13.2 percent in June.
The Reserve Bank of Australia reiterated yesterday that interest rates are set to stay on hold as the nation’s economic outlook remains uncertain. Market pricing shows a higher chance of further policy easing after the unemployment rate jumped to a 12-year high in July, the RBA cut its growth and inflation forecasts, and wage growth stagnated.
Loose monetary policy has boosted the property market. Home prices rose 10.1 percent in the three months ended June from a year earlier, according to government data released last week.
An almost doubling of Australian household debt since 1997 and banks’ exposure to mortgages are a significant source of risk to the country’s financial system, according to a government inquiry said last month.