Property News, Insights & Education

    RBA Cash Rate Hike: Impact on Investors and Australian Property Market

    Going back 6 months, even 3 months, I’d have rated the chances of a rate rise at 50% … or less. 

     

    But this week the RBA did the unthinkable … and hiked them again. 

     

    New Governor of the RBA Michele Bullock has started her term with a bang, after stating in October that ”The Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation”.

     

    But what does it really mean for investors?

     

    Frankly, it’s not something we’re worried about at all. 

     

    As far as we’re concerned, the fundamentals haven’t changed one bit. 

     

    Supply is still in crisis mode because we’re not building anywhere near enough houses. 

     

    The numbers from the ABS suggest Australia is already 100,230 houses undersupplied today. 

    And we’re adding 454,361 a year to the population, which is the population of Canberra and Darwin combined. 

     

    Imagine building a new Canberra and Darwin every year and you can see how dire the situation is. 

     

    See why house prices are almost guaranteed to continue to surge, and why even interest rate rises can’t stop them.

     

    Of course, the lessons from recent history confirm this. 

     

    12 rate hikes in 14 months didn’t even hurt the market. 

     

    By the time the 14th rise was in … the market had rebounded even higher than when it started. 

     

    So I hardly expect the 15th rise to have any impact whatsoever. 

     

    But won’t investing get more expensive?

     

    Yes, the expenses of investing will be higher after November’s rate rise. 

     

    However, it’s just part of a bigger picture. 

     

    All our investments are positively geared, so there’s a buffer to begin with. 

     

    And rents are continuing to climb higher which should easily offset this rise. 

     

    Plus, even more importantly, this is only temporary. 

     

    A recent survey by the Australian Financial Review of leading economists suggests rates will fall within 9 months. And I predict it could be on the early side. 

     

    When this happens, your repayments will fall and your rents will continue to rise. 

     

    Every time I talk to people about investing, someone is worried about interest rates. 

     

    And this article should put it into perspective, and get you back to the bigger picture where the upside potential makes any rate increase quite minor.