This article is from the Australian Property Journal archive
There has never been a better time for investors to return to the residential property market, according to the Property Investors Association of Australia.
According PIAA’s president John Moore another interest rate rise will have savvy property investors reaching for their chequebooks.
“I expect developers will start to offer incentives to clear lingering stock as interest rates continue to climb.
“With the expectation that we are at the bottom of the property cycle and with rents increasing, the potential is for capital gain and rental growth. This convergence of factors hasn’t happened for a few years,” he added.
Moore said few investors are tapped into the magic combination, but developers need to move now to make the most of the opportunity to sell, cash up and get into the market themselves.
“This is the perfect time for developers to be active in site acquisition. They recognise where we are in the cycle, and they need to cash up to make the most of it.
“It’s the ideal environment for them to deal by offering incentive on quality stock. The longer it sits on the market, the further the value is eroded. Anything less than quality will not sell readily and they may need to offer further incentives to make it attractive.” he concluded.
Meanwhile, Laing + Simmons Real Estate’s general manager Leanne Pilkington said that while there is no denying that this latest interest rate rise will cause some pain, there are better times are around the corner.
Pilkington said interest rates were still low by historical standards, while rents were on the rise.
“People need to remember that rents are rising rapidly in Sydney and are expected to continue to rise next year. History shows home ownership is the best investment you can make over the long term.
“Property now represents an excellent investment – prices are down and if you weigh up the costs of buying verses renting, it is obvious that purchasing a home in the current market still offers great value.” she concluded.
Meanwhile, the Real Estate Institute of New South Wales president Cristine Castle called on the NSW Government to abolish land tax on all residential investment and provide stamp duty relief.
“The residential investment drought hitting NSW is just as real as the drought hitting farmers but fewer property investors means higher rents, and higher rents mean greater inflation and that means higher interest rates. It is an increasingly vicious circle.” Castle said.
The Real Estate Institute of Queensland chairman Peter McGrath said the Queensland property market has weathered the seven rate rises since 2002 better than many other capital cities, and although rates are still historically quite low, this rise may prove more difficult to overcome.
“There is every possibility that some investment property owners may decide to sell as their ability to repay investment loans is stretched further. The rise will also put the squeeze on owner-occupiers who may have over-extended themselves by committing to large loans without factoring in rate rises and other lifestyle changes.
“This in turn may create opportunities for savvy investors to make the most of more affordable properties appearing on the market,” he added.
McGrath said the rise will also put further stress on Queensland’s current low rental vacancy rates.
The Real Estate Institute of South Australia’s president Mark Sanderson said South Australia’s real estate market has ridden the impact of the previous two interest rate rises well.
“The buyers are still out there, but they are bargaining harder. There is no doubt this third rise will have people recalculating their budgets, but we are hoping that our State’s affordability helps balance out the rise.
“The eastern seaboard, especially Sydney, has really felt the pinch of rising interest rates, but the stability of our market has been strong enough to help weather the storm,” he concluded.
By Kathryn O’Meara
