The Reserve Bank of Australia today is expected to lift its cash rate by 175 basis points after the May quarter inflation rate was at its highest level in seven years. According to experts, the RBA interest rate decision today will lift cash rate to 1.85%.
Australia’s first interest rate increase in more than a decade occurred amid global efforts at central banks to curb rising inflation.
This means that property owners are at the face of a dilemma: how do they manage their properties that have been bought during the peak of the market? What’s in store for them in the future? What is the next step?
Well, experts say you have nothing to worry about.
Australia’s residential and commercial property sectors are well placed to withstand further rate rises in the short-term, JLL Australia’s Senior Director for Research, Leigh Warner said.
Investors would be wise to revisit their asset allocation strategy in the aftermath of the ongoing inflation. Real estate, for instance, has continuously benefitted from a significantly lower yield compared to other sectors - and could be a good fit for a small angle of growth.
“Rising rates could also be a positive for apartment market demand. As borrowing capacity falls, more buyers will be attracted to lower price point apartments. Downsizers remain a significant driver of demand and are not generally as interest rate sensitive, they may be even more motivated to sell their larger family house before interest rates rise further,” Warner stated.
On a more enthusiastic note, Sydney and Melbourne property prices set new records over the past 12 months, despite interest rate hikes. While it is unlikely to see a backward fall, the hike in interest rate is likely to slow down rising property prices in the capital cities.
One investor mentioned that the ever changing circumstances do not mean that home owners, investors, or first home buyers should fear and take a step back from purchasing a home, it only means adjustment on something is a must – on your expectations.
Necessary tweaks around once’s lifestyle and reassessment of living expenses is a must.
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