Housing Finance

What lower US rates means for property

The US Federal Reserve’s decision to scrap interest rates hikes this year gives the Reserve Bank of Australia more scope to cut rates – and in doing so ease any transition to Labor’s negative gearing and capital gains tax changes, SQM Research managing director Louis Christopher said.

The US central bank’s decision on Wednesday to hold rates steady after it lowered its forecast for the world’s biggest economy made it more likely the RBA would make the 50 basis point-cut that many economists expect, which would reduce borrowing costs and boost demand for residential property, Mr Christopher said.

In a report modelling impacts of Labor’s planned property tax changes that prompted Treasurer Josh Frydenberg and shadow treasurer Chris Bowen to trade blows on Thursday, Mr Christopher said lower rates would reduce the hit to housing prices and also the upwards push on rents that would come from Labor’s plan to limit negative gearing to new property and to halve the capital gains tax deduction to 25 per cent.

Source: The Australian Financial Review
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