Breaking News. The interest rate drop; a win for investors and a nightmare for retirees. How are granny flats fighting for both sides?
In the first back-to-back cut since 2012, the Reserve Bank of Australia has cut the interest to a record low of 1% in a bid to fuel a slowing economy and increase unemployment. ANZ was the only bank out of the big four to pass on the full 25 point cut to its customers while CommBank and NAB only passed 19 basis point. Westpac will be passing on 20 basis points from the recent cut. But what does this all mean for the property market, investors and retirees?
Many believe the rate cut could help stimulate growth in the property market, but CoreLogic research analyst Cameron Kusher informed news.com.au that he doesn’t “think it’s going to be a rapid rebound in the housing market, we think it’s still going to be a ‘slowly, slowly’ increase in the market.”
For investors, the time is now. Building a granny flat is set to be the most beneficial investment strategy in today’s property market. Investors will be able to take advantage of the low interest rate and pay off the loan to build the granny flat in a shorter period, achieving a ‘better than ever’ ROI. For investors capitalizing on their existing investment property or first-time investors building in their own backyard, the benefits are at it’s peak and will continue to provide a return for years to come with the demand of affordable housing still on the rise.
So, what does this mean for retirees? With rates so low, banks are paying retirees meagre rates for their savings putting pressure on their retirement earnings and forcing them to eat into savings. It is obvious that retirees relying on the interest they were previously earning will no longer be sustainable. This vulnerable group are being forced to grab their hard-earned cash and invest their nest egg money elsewhere. Some banks are paying as low as 0.20% on savings, a nightmare for retirees or low risk investors. Compare this to granny flats, that are proving an attractive alternative earning 15%+. Granny flats provide that low risk high ROI investment they require with a proven rental income of circa $500 per week, a much healthier return than any bank will offer. Retirees need to act fast to minimize the effects this low interest rate sting will have on their lifestyle.