Will interest rate rises hurt ALL markets??

Investors be gone?? just joking.

We know interest rates are rising, regardless of what RBA are doing and APRA changes is also impacting with regards to servicing debt etc.

Do you think it will impact on ALL property markets?

Lots of talk about Syd and Melb as these markets have had greatest growth over last 3 years and clearly affordability will come into play here.

What about the lower entry level States? I would have thought IR rises will still effect Investor Psyche/market sentiment.

Affordability is one thing, but fear may set in and when this happens investors sit on their hands?


Thoughts??

MTR

 

It'll be a double whammy for investors if they experience a traditional 6.5% interest rate and if the loan/s are P+I.

Would love to test myself out in another state or territory, but not yet at the moment.

 

Will they impact ALL markets. HELL YES.

Traditionally one would expect a sharp increase in rates to affect the higher end of markets disproportionally however with the democratisation of property investment in Australia, who knows it might be the cheaper end of market if investors keep getting targeted by regulations and rates . . .

The Chinese can probably just hang onto their prestige property and it might be the cashflow sensitive mum and Dad investors who can't tolerate the rate increases . . .

 

I will be interested to see whether it in fact impacts on all markets.

I guess could look at history, did interest rates impact all property markets? When they hit 9-10% it killed the markets.

 

It would hit areas with higher proportions of investors, and areas where there are high LVRs. Areas where owners have low debt levels will go along happily as ever.

 

The last boom in Brisbane/ Sydney /Perth, the IR was around 6.5-7.0%

In fact in Sydney we saw the house doing a sharp upward trend in 2000, when the IR was going from 6.5 to 8.0%, so a 1.5 increase

 

I don't understand the chart? Is this Syd market just continuing to rise from 1986?
There have been corrections during this period in various markets

Going, going ... - Business - www.theage.com.au

 

Ok my $0.02. We first need to split home-owner-occupiers from investors. These are two very different beasts.

Specific to investors; I think we will all 'feel' these increases in some way or another. Savvy investors including most regulars here on PChat will have been developing strategies and planning for their portfolios over the past 6-12 months in prep for this. Well, thats what I've been doing anyway.

Its everything from battening down finance hatches (locking in cheaper interest rate fixed deals where relevant; refinancing where relevant too); to battening down tenancy hatches too (not just increasing rent rates where/if required; but also sometimes NOT increasing rates in favor of locking in say 24-month leases etc.); to battening down personal finance hatches (a bit of cost cutting in ones budget to squirrel more savings away into those sweet sweet offset accounts to help soften the blow of rising interest rates being imposed on the variable portions of the loans attached to these offset accounts).

Then, its also having a strategy to increase yields via additions or light reno, where relevant (e.g. installing a/c units etc.). In this way; investors who bought before May 2017 can also maximise their depreciation schedules. Ive been getting my schedules ammended/updated for a small additional BMT fee, with the new additions, maintenance/replacement items and/or improvement items.

Finally; a contingency plan during these times is wise to have. Keep a hawk-like eye on each of your propeties; identify which is the worst performer (there is always one!!), and have a contingency plan to dump that property if the wazoo really hits the fan

 

Sydney boomed from around 1999 to 2003. Came to a halt in 2004. Parents sold a house in Dundas Valley around 1996 for $170k. Few years later in early 2000's it was worth ~$330k. 2008 you could have bought for around $500k. Sold 2015 for >$1.3mil. Parramatta Council very developer friendly.

 

Good points.
Be interested to know what the mix is investors vs OO/FHB for each State??

 

thanks, my point is the chart does not reflect this??? Unless I am missing something

 

Rate rises, if slower or less than market expectations can actually be positive for the market.

 

It was definitely flat from 2004 to 2008/9, and you can see that. 1999 to 2003 was a huge boom, ditto 2013 to now. Chart shows 1988 to 1999 it was just growing, no boom though. I wasn't too aware of the Sydney property market back then, but nobody really talked about any booms. 1989* was when we had really high interest rates, and that would have kept a lid on price growth.* Post edited.

So... Wow. Perhaps that boom you see on the left of the chart would have continued had it not been for the interest rate...

 

I didn't see a direct correlation an increase IR triggered a property market fall. IR could be 1 of many trigger for market to rise/fall.
I think Sydney property owner will increase their rent until there is no demand. Doesn't work for Perth

 

Yup and that's cos of demand in Perth and Demand in Sydney is way different.

 

Just think of the financial strain it will put on renters with such current level of personal debt. Get 2 or 3 consecutive IR rises and rents will most likely fall in my opinion. You're already seeing more kids staying at home till their 30's and married couples moving back in with in-laws.

 

OK, here's my view. Now get ready. Scull that can and listen up.

Sheet I lost my train of thought. I'll get back.

 

Yes and No.

It matters more to Syd and Mel, purely due to already having boomed......and credit is harder.

To areas with housing at half or third or even less, no, wont make a lot of diff, but prob less investors, but they re much easier to manage if rates rise.

 

I reckon your right, what were you saying though ?

 

Was it something about floating rate bond investors don't give a rodent's rectum about interest rate rises, and in fact, actually welcome them?

Good call, @datto , that must've been the can of clairvoyence...