RBA Drops Interest Rates to 1.75%

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At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.75 per cent, effective 4 May 2016. This follows information showing inflationary pressures are lower than expected.

The global economy is continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently. While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies.

China’s growth rate moderated further in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook.

Read the full media release by Glenn Stevens: Reserve Bank of Australia Statement Monetary Policy Decision

What does this mean for you, as a landlord?

If you have a mortgage with one of the banks likely to pass on the cut, then your repayments will reduce modestly which will go some way to alleviating the hurt you may be feeling if you have, as in many cases, had a recent fall in the weekly rental income from your investment.

Another possible fall out from the cut is the possibility of tenants leaving the rental market in favour of a now more affordable mortgage, especially as the sale prices, in Perth at any rate, have softened, and the number of actual sales has dropped significantly, creating a buyers market.

Therefore, keeping your tenant is now even more important and this means staying ahead of the game, by offering your tenant a rent reduction at lease renewal time, and where the property becomes vacant, meeting the market with your asking price.

As with all things, these cycles have been seen before, and the golden rule with any housing investment is to approach it with the long term in mind. Short term gains on the property market are a rarity and the savvy investor looks for a good average rental return over a 10 to 15 year period with a capital gain over that time of between 8 to 12%.

About Gai Kroczek

Gai is the Owner/Manager of Total Care Property Management together with Bernie Kroczek of Bernie Kroczek Real Estate. Gai has been in Real Estate for over 20 years and runs a professional Property Management team utilising the latest technology to assist owners in maximising their investment while also assisting tenants.

Gai is also the web designer and maintains all the office technology keeping abreast of all the many changes and implementing them to make sure our owners get the best possible service.

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