Cash rate remains at RECORD LOW

Cash rate remains at RECORD LOW

Our business partner, EK Capital have released this report to educate investor on the Reserve Bank of Australia’s board meeting recently.
The Reserve Bank of Australia’s board (RBA) made its third call on the cash rate this year and, in line with expectations, kept it steady at 0.10%.
This is despite the faster than expected economic recovery and the surging property market.
RBA governor Phili Lowe has repeatedly maintained “the RBA does not, and should not, target housing prices” and rates will not be lifted until 2024 “at the earliest”.
The unemployment rate fell to 5.8 per cent in February and the number of people with a job has returned to the pre-pandemic level. GDP increased by a strong 3.1 per cent in the December quarter, boosted by a further lift in household consumption as the health situation improved.

The recovery is expected to continue, with above-trend growth this year and next. It will take some time to reduce this spare capacity and for the labour market to be tight enough to generate wage increases that are consistent with achieving the inflation target.

In the short term, CPI inflation is expected to rise temporarily because of the reversal of some COVID-19-related price reductions. Looking through this, underlying inflation is expected to remain below 2 per cent over the next few years. Housing credit growth to owner-occupiers has picked up, with strong demand from first-home buyers. In contrast, investor credit growth remains subdued.

Is it the right time to invest in real estate?

My answer is a resounding “yes!”

The most obvious reason you should invest now is the historically low-interest rates as stated above. By locking in a low-interest rate, you’re literally saving yourself thousands on your mortgage.

Let’s just say you put 20% down on a $300,000 house. If you were to get a 2.5% interest rate vs. a 4% interest rate, you would save $197.50 per month in interest payments, which is $2,370 per year. Over 10 years, that’s $23,700 saved.

The second reason why now is the best time to invest in that real estate is a time game. If you ask any real estate investor what their biggest regret is, it’s almost always along the lines of, “I wish I had bought more properties earlier when I was younger”.

Real estate builds wealth in three ways. We’ve all heard the story about how a young real estate investor bought properties a long time ago in an up-and-coming area or even in a big city, and 20 years later, they’re a multi-millionaire because they held onto them.

That’s because appreciation is the biggest wealth builder for most real estate investors. Not only can you deduct nearly all expenses incurred on the property, but you can also deduct “phantom money”, known in the real estate world as “depreciation”. Basically, the ATO acknowledges that properties have wear and tear. This annual depreciation can be deducted each year as a loss against the rental

 

If you are thinking of investing in real estate, contact us for a friendly chat  by completing this form and our specialist will contact you for a non-obligation quote

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