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Cash rate stays steadfast

By Brett Pilgrim

Anyone who has engaged the services of Ray White to buy rentals in Adelaide understands the ups and downs that come with the investment real estate market. This is why the latest Reserve Bank of Australia (RBA) update on the official cash rate (OCR) will be music to the ears of investors.

In a 4 November press release, RBA governor Glenn Stevens announced that the OCR is staying steady at 2.5 per cent for the 15th month in a row. It has stayed at this rate, without wavering, since August last year.

While the Australian dollar has not met the RBA expectations of it to bolster economic stability, Mr Stevens has noted that government and monetary policy have fostered security for the country.

“Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time,” he added.

This growth has been particularly positive for the investor market. Cash rate stability has helped to keep interest rates low, which has seen more and more competition in the lending industry. This has allowed investors to buy property with low interest rates, and Mr Stevens noted that this buying group is pushing for higher returns on their property.

The RBA’s September report on the housing market also showed an increase in interest-only loans over the last few years. This will also be of note for owners of real estate in Adelaide, as it shows a strong upturn in a popular investment strategy.

By only paying interest on a loan in this low cash rate environment, investors may be able to reap strong capital growth benefits. After all, Mr Stevens did acknowledge that dwelling prices are still rising. According to the RP Data monthly indices, dwelling values for the City of Churches have risen 4.31 per cent in the last year.

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