Question

Identify the possible impact of the interest rate cut on the Real Estate market in Australia. [Note: You can analyse the differences in impact between foreign sourced investment and local sourced investment in the Real Estate Market, you can use table, chart, graph wherever you would find it appropriate] Use real-life examples Can you give me a summary around 500 words? I need this for my job

Answer 1

Real estate is all about experience and location. Buyers of real estate want to experience properties first hand and almost always, they want to renovate the property so that it suits their needs or requirements. But finalizing on a property is a cumbersome job as buyers usually check out many different properties before finalizing on one.

The various possible impacts of the interest rate cut on the real estate market in Australia are as mentioned below:

• Due to the lower interest rate by RBA (Reserve Bank of Australia) , the prices of property or real estate will increase and as a result individual invest their money in foreign sourced investment and the demand of real estate for local sourced investment decreases.
• Interest rate also affects the rates of mortgages. It means if the interest rate decreases, then the rate of mortgage increases due to the increase in price of the real estate.
• Interest rate also affects the prices of bonds. It means if the rate of interest decreases, then the price of bonds increases or vice-versa.
• Interest rate affects the borrowers. It means if the rate of interest decreases, then the potential borrowers are not able to get more money or finance from the bank due to the higher demand of cash.

There are many factors which affects the rate of real estate:

• Tax rate on the real estate
• Rules and regulations of banks related to the real estate
• Population of a country
• Demand and supply of the real estate
• Cash supply in an economy
• Situation of an economy in country

The various factors that affects the interest rate are as mentioned below:

• Higher demand of money leads to an increase in the rates of interest
• Due to the increase in cap price who adjusts the supply of money according to the situation of an economy, this cap price leads to an increase in risky investment by the investors due to which the interest rate increases by the bank.

The benefits of lower interest rate are as mentioned below:

• Lower interest rate helps in boosting the future rental income of real estate
• Increases the cash flows for an individuals or organization who wants to borrow money from the banks
• It helps in increasing the option for buying another property or real estate for the individuals or organizations who wants to invest in the property.
• It helps to the investors to take loan from the banks very easily on lower credit policy or good credit policy.
• It helps to the investors to easily invest their money in real estate rather than saving their money.
• It helps to the investors in increasing the rate of return by earning more money through the rent.

Therefore, the prices of property or real estate depends on the interest rate decided by RBA (Reserve Bank of Australia). It means if the interest rate increases, then the price of property decreases and if the interest rate decreases, then the price of property or real estate increases. As a result, individuals invest more in the foreign sourced real estate due to the lower interest rate.