The impact of lowering interest rates

I have noticed a drop in "new" homes coming on the market, or in our technical terms new listings, over the last month or two.

My conclusion from this observation is that because the interest rates have dropped significantly it means that people are getting back to a point where they can start covering their bond repayments again and are thus not being forced to sell their homes. Some analysts argue that it could be the influence of the change in seasons, but I don't believe that the winter could have such a profound change in a market so deep in recession. There is still a huge oversupply of homes for sale on the market and thus many bargains still remain unsold, but I believe that the supply will now start shrinking slowly as the bargains start disappearing off the market.

As for the demand for houses, I do think that the demand is slowly starting to rise as a result of the drop in interest rates which makes the bond repayments more affordable plus the fact that the house prices have dropped by between 10% and 20% over the last couple of months. There is still the serious problem of not qualifying for bonds or not having enough cash for the deposit which keeps the demand very low. However, I have met with quite a few clients over the last couple of months who have decided to first get their financial matters sorted out before venturing into the property market. Most of these people sorting out their financial will be ready to start buying by around October 2009, which will hopefully indicate the turning point in the market. We can only determine a turning point in a market months after it occurs and we have collected the statistics and done the analysis.

So in conclusion, if you are looking to buy a bargain property it is now time to focus and to start making a short list of the properties you like and to start applying for your mortgage bond. Or if you are thinking of selling your home - please postpone this until 2010 if at all possible, because by then the supply of homes will have shrunk and the demand would hopefully have caught up to the supply again.

Thank Goodness for another cut in interest rates this week!