Due to the RBA lifting interest rates by 0.25%, would I be right in assuming some potential home buyers will now hold off from buying a property, thereby causing a greater demand for rental properties and hence an increase in rents? Is this drawing a long bow? [hmm]
IMHO an interest rate rise will invariably cause rents to rise if for no other reason than investors will look to pass it on to their tennants. It will probably take awhile to filter through though. Whether or not 0.25% rate rise will cause home buyers to hang off purchasing I would speculate that the rise isn’t significant enough on its own although it may cause buyers to lower their budgets a bit. I think we’ll see another interest rate increase before the end of the year and IMHO that will have more of an impact than the latest rise in terms of cooling the market. Potential buyers might decide to hang off buying (for awhile anyway) and possibly those existing home owners that overstretched during the good times will be forced to sell. Probably be a good time to pick up some bargains.
Flatout
I agree “flatout”, in regards to your statement about being able to pick up some bargains. I have an offer in at the moment on a IP, it is ridiculously below the actual price it was listed at, but I know that the sellers have actually listed it lower than what they paid for it.
And I also agree that rentals should increase with further rate rises.Via the valuation I had done, found out that they bought for $272000 at the top of the market in the area in November, and now have it on the market for $269000. So they are keen to get rid of it. An over eager agent has not helped, she was constantly asking if I had the money ready to go and making sure that I was really serious.
So there will be some people in some serious troubl;e finacially, I believe, due to overcommitting etc. So bargain hunters lookout, especially if another rate rise does eventuate.[happy3]
FATMAN
Originally posted by flatout:IMHO an interest rate rise will invariably cause rents to rise if for no other reason than investors will look to pass it on to their tennants.
Some may try, but many property investors have little or no debt attached to their properties. I think market forces of supply and demand for rental properties are more important than rental returns, otherwise how do we explain the majority of IPs being negatively geared?
Whether or not 0.25% rate rise will cause home buyers to hang off purchasing I would speculate that the rise isn’t significant enough on its own although it may cause buyers to lower their budgets a bit.Well it has to. A .25% interest rate rise reduces affordability (and therefore borrowing capacity) by around $5000 per $100k (a more accurate estimate from any of the mortgage brokers on this forum?), which places similar downward pressure on prices, especially near the upper limits of FHB range.
And finally, I’ve been amused by recent reports estimating rental prices will rise by as much as 40% in Sydney over the next 4 years and 25%+ in Melbourne. This would have a large impact on official measures of inflation and force further interest rate rises.
Cheers, F.[cowboy2]
Also, as always with rate rises, the immediate effects will be absorbed by short term debt (ie: credit cards, personal loans, home loan redraws) – at least initially.
No one can predict which rate rise will be the straw that breaks the camels back, but i’d suggest this recent rise won’t do it. Australians have been able to suffer HUGE increases in petrol over the last few years, and I think it will take at least another rate rise to push the market over the edge.
The reason we (Australia) are so vulnerable is that our marginal propensity to consume (MPC for those who have studied Economics) is something like 96%. This means that we spend 96% of our income and save only 4% [blink] This leads to our obsession with credit card debt, internet purchases and store cards – Quite sad really. [mellow]
By the way, I’ll give odds of 3-1 that we’ll have another rate rise by the end of the year… Any takers?[evil4]
My 2c,
Steve (YI)
“Knowledge is Power”
yep i get that feeling also that intrest rates are going to raise that little bit more by the end of the year. I think that its going to have little effect in the near future, and what i think normally happens is that people tend to hold on as long as possible before they feel they need to sell.
I feel that thosed ‘forced’ sales and low reserve prices at auctions are going to be a little futher down the track IMO
“It’s not how much money you make, It’s how you spend it that matters.”
Aspiring property developer
Giulio Taranto
Will rate rises cause rent increase , if investors leave the market because returns are not good enough and there become a scacity of rental on the market then sure rent will rise .
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