While the Reserve Bank of Australia has dropped interest rates to a record low, the current drought is impacting the local property market more than any other factor according to one real estate agent.
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LJ Hooker Bega principal Gerry Tarlinton said the current drought conditions have a far more reaching impact on the market than the Millennium drought of the turn of the century.
"I would say for Bega itself, the lower end of the market is rising, the centre is stabilising and the top end has reached its limits, but I don't think the interest rate will have any effect because it's so minor," Mr Tarlinton said on Friday.
"I think the drought is affecting the market more than interest rates. Buyers have been disappointed when they get here and see how dry it is.
"If someone wants to move to the Bega Valley, and wants to have horses for example and they see there's no grass and the dams are half dry, then what's in their head doesn't match up to what they see.
"That's the effect I see. If the whole Valley turns green then that rural side of the market will take a tick."
In March Domain reported the average house price in the Bega Valley local government area had increased by almost 40 per cent over the last six years.
While the average March house price of $499,000 was less than the average from December last year of $517,500, Mr Tarlinton said movement on the local market is generally around three to four months behind Sydney, and while he agreed with the Reserve Bank rate cut, it remains uncertain whether all the banks will pass it on to home buyers.
Following the lowering of interest rates to a new record low of 0.75 per cent, Reserve Bank governor Phillip Lowe said mortgage rates are at record lows and competition is "strong" among borrowers.
Mr Lowe told a Reserve Bank board dinner on Tuesday, while the economy has been through a "soft patch", the bank is "expecting a return to around trend growth over the next year", with the stabilisation of housing markets in Sydney and Melbourne playing a role in the upswing.
"There are further signs of a turnaround in established housing markets, especially in Sydney and Melbourne. In contrast, new dwelling activity has weakened and growth in housing credit remains low," he said.
He estimated that around a quarter of households with a mortgage have either no financial buffer, or a "very small one".
"Loan arrears remain low, although they have risen over recent years. Also, we estimate that for almost four per cent of borrowers their current loan balance exceeds the value of their property," he said.
Half of these borrowers are in Western Australia, where there has been a "large and persistent decline in housing prices", he said.
CoreLogic analyst Tim Lawless said the lower interest rates and improved access to credit are fuelling price rises in Sydney and Melbourne.
"There is evidence that many of the largest regional centres are starting to recover with Geelong, Illawarra and Newcastle-Lake Macquarie all recording a rise in value over the September quarter," he said.
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