Will interest rate rises hurt ALL markets??

Discussion in 'Property Market Economics' started by MTR, 9th Jul, 2017.

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  1. Johann_

    Johann_ Well-Known Member

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    I think there are a few issues presenting them selves here.
    1) Wage Growth has Halted.
    2) Debt levels are at its highest level.
    3) Most people are assest rich but cash poor
     
  2. mickyyyy

    mickyyyy Well-Known Member

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    I'm sure I read an article some time ago showing QLD growing in value when rates started going up last cycle, let me see if I can find it and post it up here!
     
  3. Pentanol

    Pentanol Well-Known Member

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    Even with wage stagnation and high debts in Australia Im a little concerned that RBA may turn Hawkish and start increasing the rates sometime in early 2018. Canada has recently turned Hawkish and increased by 25% so itll be interesting to see the impact of that as PI and IO both increases rather than just PI. Obviously we are prepared but would prefer not to pay more than we have to like most people lol.
     
  4. Lacrim

    Lacrim Well-Known Member

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    Yes there was a protracted period when it was - can't remember when exactly but I think 2006 - 08, prior to the GFC
     
  5. God_of_money

    God_of_money Well-Known Member

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    interest rate rise? are we dreaming? I am paying the lowest ever rate @3.7%. I bought my 1st PPOR in newcastle paying 8-9% (2006) and 2nd one in Sydney paying 7% (post GFC). I dont think it will kill ALL market, but only rentvestor. We should thank AHPRA.
     
  6. dabbler

    dabbler Well-Known Member

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    But can you clearly see the price differential ? Or do you think say Syd is on the verge of a breakout in pricing ?

    You are not paying 3.7 today for investment, even a year ago, there was a very small window where with some lenders you could get in at under 4, but you would have to had locked it and been a PPOR to get that rate, locking in at such rates only gives you a few years, some people look beyond what they have to do in a year, and the trend is clear, I say it was clear over a year ago.
     
  7. +men

    +men Well-Known Member

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    Thanks APRA for penalising all the hardworking investors who spent extra effort to to build investment portfolio and achieving financial freedom ourselves, instead of relying on the government pension to fund our retirement?
     
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  8. dabbler

    dabbler Well-Known Member

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    No good if the financial system collapses, this is what the changes are about, not punishing investors, banks are the ones doing that as are easy targets, but you watch them turn on home owners later when it suits. Bye bye honeymoon period
     
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  9. Ted Varrick

    Ted Varrick Well-Known Member

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    Imagine if you were a fly on the wall in any meeting between APRA and the RBA in who's to blame for the resi property bubble and who's going to do something about it?

    And, whilst all the resi owners are stoked that prices are going through the roof, and some using the home ATM for new cars and holidays, when the S H 1 Thompson hits the fan, who are they going to blame?

    And will APRA and the RBA care about what happens to the bank bondholders, and <cough> hybrid investors, in considering who they are going to bail out?
     
  10. Hwangers

    Hwangers Well-Known Member

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    question - if interest rates rise would rents also rise as investors look to offset the hike from their tenants? what happened previously, any seasoned investors care to share?
     
  11. MTR

    MTR Well-Known Member

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    interest rates are already rising.
    Rents will be totally dependent on supply versus demand, if there the market is flooded with rental properties, rents can actually drop, which is what we are seeing in Perth market at the moment.
     
  12. Angel

    Angel Well-Known Member

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    What MTR said.
    If it is an area with mostly rentals, then rents are dependent on supply and demand. LLs cant hike up their rents just because our interest rates increase, just as we cant increase rents when the insurance companies slog us just after a spate of natural disasters or whenever the councils increase rates.
     
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  13. Angel

    Angel Well-Known Member

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    My recollection of previous cycles had Brisbane religiously increasing in values about two years after Sydney did. This time it has been much longer to see the growth due to the downturn in the Qld economy post GFC which didn't affect Sydney and Melbourne to the same degree.

    In the past we had the benefit of Japanese buyers on steroids, but the Japanese economy is in retirement these days. The Chinese are still discovering there is land north of the Sydney-Newcastle Motorway.
     
  14. JDP1

    JDP1 Well-Known Member

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    i would say mexico did get whacked (but not KO) during the GFC. Brisbane (and australia in general) had resources that china and surrounds was paying big dollars for that saved it. China went to continue its infrastructure binge ( mostly to keep local chinese employed and the capital freely flowing - wise move on their part; both for them and their suppliers such as australia)
    What we are seeing now in brisbane IMO is a natural consequence of an economy in transition from mining reliance to one that can stand on its own two feet without heavy reliance on mining. Mining is still important, but not as important as it used to be. This takes a very long time and is the reason for the 'delay' in its boom -like CG performance. As i said in another post, unless brisbane is a dubai and the state govt spends a hundred billion in developign non mining...its going to take time...
    The booms in mexiico- are ( mostly) cyclical in my view- all the big financial centres such as london, NY, singapore,etc have all done well as the same time mexico did. This is further spurred by BRICS money preferring those places ( first priority, in many cases second and third as well across countries if need be..)
    The tier 2's that have more reliance on select industries ( historically at least, and certainly 'impression' based) like brisbane, have shown modest growth- growth of a secondary nature in line with where they are in cycles and how the 'money' views them.
    I agree with your last comment- a lot of BRICS dont know there is anything to australia except sydney/mel and perhaps some beaches somewhere on the coast. The BCC is tying to change that - hence its aggressive marketing ( brand/name recognition) to those countries. So is the brisbane airport in partnership with BCC by having more flights to china direct.
    In my view, brisbane has 2-3 years of modest growth ahead of it.
    Dunno what will happen after that. However, im quite sure that in the next cycle in brisbane ( whenever that is), it will kick arse ( CG percentage wise, not necessarilly dollar wise) that will make sydney and melbourne envious. It should be a much stronger player at that time, as evidenced by all the non-mining projects in progress.
    In RE, id recommend a hold period of at least 2 cycles. Therefore, buying now will atill result in substantial growth across this cycle and the next one.
     
  15. God_of_money

    God_of_money Well-Known Member

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    It is a variable rate with CBA with 1.55% disc for life of the loan
     
  16. God_of_money

    God_of_money Well-Known Member

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    yes, it will kill the rentvestor, but will help 70-80% of PPOR
     
  17. Angel

    Angel Well-Known Member

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    I still expect IRs for PPOR will increase next year once they have bled all they can out of investors and the banks demand OOs feed them too.

    I know, I'm a cynical old girl
     
  18. Darwin55

    Darwin55 Well-Known Member

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    how will this kill the rentvestor???
     
  19. Tenex

    Tenex Well-Known Member

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    My personal belief is that any interest rate rises from here is going to be very slow, at least in Australia. The reason is the state that the economy is in. It wont be far fetched to think that RBA may even consider cutting the official rate now that APRA has gone insane with their powers.

    However any form of interest rate rise will have a bigger impact on places such as Brisbane, Adelaide and other cities than it will have on Sydney and Melbourne.

    The reason is that interest rate hike will usually tamper spending and tampering spending will usually slow the economy.

    Now Melbourne and Sydney have a larger economy and are better positioned to deal with lower economic activity. But other places that do not have a job market as large as Melbourne and Sydney will have higher interest rates to pay and higher unemployment or underemployment to deal with and therefore less demand for people to own a place there.

    Thats just my take on it.