Interest Rate Cut Set To Boost Apartment Sales By 10%

The apartment market will be given a lift by the latest interest rate cut, with sales likely to rise above last year’s historic high, according to figures released by the Housing Industry Association (HIA).

Apartment sales jumped 20 per cent to 14,293 for 2014 from 11,905 in 2013 and the recent rate cut would add to the growth, meaning sales could be as high as 15,500 for 2015, HIA Chief Economist, Harley Dale told the Australian Financial Review.

“If we had upward momentum anyway and then we got a rate cut subsequent to that, then the rate of that momentum is likely to be faster still,” Dr Dale said.

The prediction does not mark a record – sales reached 36,000 in 2001 when demand was rebounding after a lull that coincided with the GST – but it hastens the growth of apartments relative to detached houses that is already taking place.

Apartment purchases are more linked to interest rates, particularly by investors who are affected by yield considerations, while detached houses, more bought by owner-occupiers, are often subject to wider considerations.

While interest rates influence apartment demand, Australian lending rates are no consideration for foreign investors. Even for local investors, personal circumstances were the major consideration, Phil Meggs, the Chief Executive Officer of Little Residential told the Australian Financial Review.

Even after a 9.2 per cent monthly decline in multi-unit sales in December, they were up 12 per cent on the three months to September and 19.5 per cent above the same quarter a year earlier.

The HIA has been tracking new dwelling sales since 2000, and the highest calendar year of sales recorded to date was 151,000 in 2001.