How to invest real estate at zero interest rates in 2021
On March 2, the Reserve Bank of Australia (RBA) held its first meeting in 2021. During the meeting, it was announced that interest rates will continue to be maintained at a historical low of 0.1%, and that the quantitative easing policy will be further extended and strengthened. In addition, the RBA will continue to do so this year. After completing the existing bond purchase plan in April, it will further purchase 100 billion Australian dollars of bonds issued by the federal and state governments. Philip Lowe, who is an Australian economist and as the current Governor of the Reserve Bank of Australia, said at the meeting that although the world has made progress in the field of corvid-19 vaccines and the prospects for economic recovery are slightly better than previously expected, the realization of the recovery is still inseparable from a strong fiscal and monetary policy support. Therefore, the central bank will continue to maintain a low interest rate policy and further promote quantitative easing.
The RBA’s intention is clear, and it wants to continue to stimulate the local economy by increasing monetary stimulus to encourage consumption, finance, and investment.
Against the background of over-issuance of global currencies, the price increase of real estate assets has become an irreversible trend, because real estate properties have natural anti-inflation, value-added, and value-preserving properties, coupled with Australia’s natural environment that is particularly suitable for living. Real estate under blessings has become a hot spot for investment and will continue to be pursued by investors from all walks of life.
Real estate investment-the best choice in 2021
The following indicators indicate that 2021 will be a harvest year for real estate investors
Consumer confidence and business confidence are constantly improving
The number of COVID is exceedingly small, and the prospects for a strong vaccination program are particularly good. Our economy is growing faster than many people expected-we are in a V-shaped recovery. To further create employment opportunities, consumer confidence and business confidence (leading to spending and employment) will support our real estate market.
There are more buyers and sellers in the market, and the number of transactions has greatly increased:
From the last few months of 2020, the Australian housing market has been heating up, and the auction permission rate has maintained strong growth. Not only in the two large auction at Melbourne and Sydney, but also most of Australia cities, the auction permission rate is also very impressive, especially into the new year. Since then, especially in recent weeks, the clearance rate of each weekend has reached over 80% and even hit 90%. The auction site has been crowded with people and it is difficult to find a house.
The latest interest rate cuts and the “guarantee” of maintaining low interest rates for at least three years will give home buyers and investors full of confidence
Dr. Lowe, the chairman of the Reserve Bank of Australia, expects it to be 2024 at the earliest. According to Dr. Lowe’s recent emphasis, the Reserve Bank of Australia will not raise interest rates if the following conditions are not met:
- The Consumer Price Index (CPI) is stable between 2-3%.
- The average wage level has increased significantly.
- The unemployment rate fell below 5%.
Dr. Lowe judged that according to the most optimistic estimates, these conditions will not appear before 2024.
Interest rates have stayed at the lowest level in history. Additional currency issuance has caused asset prices, especially real estate prices, to continue to rise. This will increase new credit risks and pose new threats to economic recovery. How should we deal with it? In this regard, Dr. Lowe’s answer is: Housing prices are a consideration in formulating monetary policy, but it is not a policy goal. The irrational rise in housing prices will cause credit risk, and it should be adjusted through “prudential regulation”, although there has not yet been such a situation that worries us.
Banks are keen to launch new businesses-this is another piece of good news for our real estate market.
The deferral of bank loans has been decreasing-as many people fear, an avalanche of forced mortgage sales is unlikely.
Based on the above analysis, we believe that 2021 will be a harvest year for real estate investors.
All investments carry out risks. For example, although people think that real estate is a safer investment strategy than stocks, it still carries the possibility that you may lose money. However, it can be said that 2021 is the most extraordinary year in the history of the Australian real estate market, so it may bring greater risks.
Tip: If real estate investors have any questions about existing credit, please contact us.
