In June, the Aussie housing market reached an all-time high of $10.2 trillion. It’s a number that is difficult to even fathom. Do you know how many zeros that is? $10,200,000,000,000.
Even though the market appears to be booming, The Reserve Bank of Australia (RBA) increased interest rates for the third month in a row. The RBA raised the official cash rate by 50 basis points to 1.35 per cent – the highest since May 2019.
This is in direct contrast to their prediction in July 2021 that they would keep the record-low interest rate of 0.1 per cent through at least 2024.
When the market fluctuates, it’s like surfing: some property owners skillfully ride the wave of supply and demand, interest rates, and location spikes, and they win big; others jump in without a strategy and let the current pull them out to sea. Grab a surfboard and get ready to paddle; we’re here to show you how to navigate the shifting real estate market so you come out on top.
What Caused the Spike in Interest?
Philip Lowe, the RBA Governor, stated that the purpose of the rate increase was to curb inflation after record low rates boosted the economy, particularly during Covid lockdowns.
The emergency is over, and the fixed rates and other precautionary measures that were taken are no longer needed. We are now seeing how those temporary measures truly affect the economy.
What Does This Mean for Investors?
While there is currently a buzz that the Aussie housing market may crash in some areas, investors are grabbing properties left and right.
In fact, investors currently hold almost 33 per cent of mortgage activity, up from about 24 per cent in 2021.
According to The Australian Financial Review, David Bailey, chief executive of Australian Finance Group, the nation’s largest mortgage brokerage, says its investment loans have risen to around 26 per cent of business in the first quarter, from a low of 21 per cent. “It is a slow rebuild,” says Bailey. “But investors are attracted by very low vacancy rates and positive yields.”
Investors aren’t worried about the increasing interest rates because there is currently a high demand for renters—especially as internationals are returning for school or business.
And let’s face it…while the interest rates hit record-lows in 2021, many investors started out investing with higher rates. So, the increase in the rates really isn’t much of an issue.
For many investors, now is still the ideal time to buy. Though the rate isn’t record-breaking any longer, it’s still low at 1.35 per cent. In the United States, the interest rate recently jumped from 3 per cent to 6 per cent, a reminder that 1.35 per cent is a good interest rate to lock in at a fixed rate.
Interest Rates and Rent
As the interest rates rise, for many investors, it means the need to increase their rent. Nevertheless, landlords must be wise in whether or not it’s the right time to make any increases. According to News.com.au, First National Real Estate CEO Ray Ellis stated, “If the tenants are prepared to accept a legitimate increase in the rent, and the landlords are prepared to offer a legitimate increase in rent to cover borrowing costs, that’s still a good relationship between the two.” Ultimately, Mr. Ellis says the best way to step into the property market with assurance during this unprecedented period is to ensure that you keep within your financial limits.What Does This Mean For You?
At OneCorp, we’re here to help! We want to give you the confidence and financial wisdom to know what your budget can realistically handle in today’s Aussie Housing Investment market. Plus, if you know how to leverage your investment property correctly, you can use it to pay down your mortgage faster and better navigate financial market shifts. If you’re ready to get started on your investment property journey, now is the time. With interest rates still at a reasonable low and with the market predicted to rise over the next year, that makes now the ideal time to dive in before prices inflate. Ready to create a property investment strategy that’s perfect for your goals? We can help! At OneCorp, we combine your vision with our knowledge. We’ll help you find your dream property while holding your hand through the whole process! Getting started on your investment property journey has never been easier:- We start by helping you set clear goals and objectives as to what you want to achieve through property investment.
- From there, we run the numbers through proprietary software to accurately assess exactly what you need out of a property portfolio to achieve those goals.
- Lastly, we find the perfect property to make those objectives a reality!
