The year 2020 has really made a big debut. This year has started as one we will really remember, with the devastating bushfires, and now the coronavirus pandemic – it is not exactly what we all pictured, and nothing anyone could have predicted. We take a look at how the coronavirus is likely to impact our economy and Australian Property Prices, through the decisions made by the Reserve Bank of Australia (RBA).
At the first RBA meeting for 2020, the decision was made to hold rates at the record low of 0.75 per cent. Contributing to this was the uncertainty of the coronavirus outbreak alongside the impact of the recent devastating bushfires.
Although the rates remained on hold at the first meeting, there are murmurs about a rate cut coming later in 2020 in an attempt to influence consumer spending due to the sluggish retail sector and to help lift employment and wages growth.
However, for the property markets- any further rate cuts could fuel home buyer demands and increase property prices. A big win for investors!
Already this year, we have seen the property markets across Sydney and Melbourne see a surge in prices, showing signs that the property markets had recovered from the decline that occurred since 2018.
There has been a rise in dwelling approvals, and new mortgage commitments also up this year.
But how will the Coronavirus really impact our property prices?
The reason is, Australia is a relatively small economy when compared to the US and China and we are often subject to the fortunes of these economies abroad.
The impact of the Coronavirus on our economy is likely to slow overall economic growth as China’s demands for our resources halter and we will also experience the impacts from a reduction in the tourism industry.
We have already seen some of the impact as Chinese shares have dropped nearly 9% amid fears of the impact from the coronavirus.
The pace of economic growth in Australia will be slowed by the reduction of tourism activity, and the caution taken by businesses and consumers in general to spend will further halt inflation from moving upwards.
In turn, the Coronavirus is expected to largely influence the RBA for a rate cut later in the year to try to stimulate our economy.
The historically low interest rates and the possibility of even lower interest rates will provide a boost in housing activity, as well as influence investors to hold on to their property portfolios.
Due to the instability of the Share Market, and the low interest rates offered on bonds and term deposits, we also predict that investors will be pulling money out of other investments and instead, putting their money into Australian investment property because tangible “bricks and mortar” investments are preferable in uncertain times.
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