Should You Invest in Australian Real Estate When Interest Rates Increase?

Interest rates are influenced by the cash rate set by the Reserve Bank of Australia (RBA) on the first Tuesday of every month (except January) for the following month. This action has a profound impact on the entire economy and especially property values ​​nationwide.

If there is a change and your lender decides to convert that to their variable rate, the borrower’s home loan payment will also change. Lower interest rates will leave you with more money in your pocket each month, but higher interest rates will leave you with less money.

“How interest rates affect house prices is one of the questions we often answer,” says Ash Brown, Director at One Agency Orange. “It’s important to understand what affects them so you can time your purchase or sale of property to your best advantage.”

HOUSE PRICES AND INTEREST RATE

Generally, home prices fall when interest rates rise because rising mortgage payments subsequently reduce demand from buyers. People are less willing to start a larger mortgage, fewer people want to buy, and real estate prices either fall or simply stagnate until interest rates fall again.

When interest rates fall and mortgage payments fall, it often brings buyers to the market causing real estate prices to increase. Buyers waiting for a better rate can all appear at once and leave you scrambling through auctions and inspections.

If this drop puts you in the market as a buyer, prepare quickly before real estate values start to rise or you could be priced out of the market. The best properties will sell quickly and become harder to find.

BUYERS AND SELLER

There are general rules about the real estate market and interest rates, but they are not absolute. Rising interest rates could actually be the perfect time to buy a home despite the higher mortgage because that same factor will cause more properties to come onto the market, putting downward pressure on prices.

“Contrary to popular belief, it is better to buy a home when interest rates are rising,” advises Ash. “The cooling of the market could be the reason the interest rate rise is happening because the Reserve Bank wants to cause a fall in prices. It’s an effective move to make that happen but it won’t happen suddenly, making this a great time to think about a purchase. “

Likewise, falling interest rates can be a great time to sell as many new buyers enter the market. Often those buyers have been waiting for rates to drop, so they want to buy a property now and be able to sell it to you quickly at a good price.

Despite the hype that often accompanies interest rate changes, you don’t need to worry. It is highly unlikely that anything drastic will happen suddenly. It takes time for the market to react. Smart investors can take advantage of this.

“There is an important strategy in timing the sale of real estate when interest rates change,” says Ash. “The impact on the market is not immediate. If you are looking to sell, understand that all the talk about the market slowing down won’t happen in a week or even a month. It takes time for the market to change and we can see how big that change will be, if at all.”

“Sellers can still do well after interest rates increase and buyers can still do well after a decrease. There are also other complicating forces such as inflation and household debt levels. Interest rate is one of those factors but it is not all. Times like these make it even more important to talk to an expert who truly cares about helping you prosper in the markets.”

SMART STRATEGY

History shows that there is no set formula for how the market will react when interest rates change. Although they are a major factor in property prices, they are just one of several factors, so be careful who you listen to and where you get your information. There are plenty of armchair experts ready to offer opinions!

“Predictions are always about what is likely to happen,” says Ash. “The more you know, the more accurate your predictions are, but we’re not talking about an exact science here. There are always other variables, especially the location of the property. ”

Whether you are looking to sell, buy or invest now or in the future, staying up to date with economic news and trends is important information to keep in mind. The smartest strategies include multiple factors and an understanding of real estate trends. However, nothing beats knowing the specific location you already have property in or are looking to buy. Not every national trend is happening in every suburb or town.

You don’t have to spend a lot of energy learning about all of this or keeping track of changes when you have a real estate professional like My Australian Property, who is happy to share years of experience with you. Call us or meet our team at our office. We bring professionalism and enthusiasm to our work, with a service designed to make your property experience as satisfying as possible. CONTACT US TODAY: +61 478 866 868 – info@myaustralianproperty.com