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Rates Cut Unlikely to Improve Sales-Can the Cut in Interest Rate Improve Sales?

Rates cut will not improve the property sales; this article will give details of the reason.

The recent interest rate cut will not improve the property sales in anyway, according to the ACT Real Estate Institute (REI). The Reserve Bank of Australia had reduced the rate of interest by 0.25 per cent and almost all the banks have also come forward to cut the interest rates on the mortgage customers. But these steps will in no way help the improvement of sales of property, says the REI.

Nearly every sector wanted the Government to cut down the charges and the bureaucratic procedures involved to encourage the developers and investors get back into the housing market. They also say that the government should, in addition, reduce the infrastructure taxes and charges that too in the new areas in the south-west and north-west centres. The crisis in the suburbs is the worst with 0.1 per cent to 1.2 per cent drop. The low income group is put to lot of stress and because of this some people are turning towards agricultural lands. It is very good to note that the Reserve Bank of Australia has taken steps to cut down the rates. But even then the government along with the Reserve Bank of Australia has to take steps to further cut down the interest rates so that we can find more potential buyers coming forward in the housing market.

On the other hand, the real estate agents are hopeful that the property market will surely improve by the spring season. The REI says that it will have to make further more cuts to enable and persuade the people to buy houses. The property market will not respond like the money markets where skilled sellers react right away or wait to know the reaction of the Reserve Bank of Australia. The housing market will surely take a little longer time to come out all the way from this stressful situation.

This is, however, an encouraging sign and is pleased to see it starting to go down but one more move would be an immense help to both the buyers as well as the sellers.

Some of the economists are of the view that it is not enough if the Reserve Bank of Australia reduces the interest rate by 0.25 per cent and that, as already stated, will not help the improvement of the housing market in any way. But they suggest that the Reserve Bank of Australia will have to make a 0.5 per cent cut to make sure that something is being passed on to the mortgage stressed customers. Because of the higher cost of money, the bank costs are rising and they are likely to hold on to some of the reduction.

Thus the act of the Reserve Bank of Australia in making cuts in the interest rate has in one way or another helped the persons who have been stressed out for repayment of the mortgage loan and hence the buyers will surely come forward to buy the property.

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