The interest rates waiting game

The interest rates waiting game

June 26, 2017 | by DiJones

Few buyers are complaining about the fact that we’ve seen falling interest rates in Australia for the last six years, with the RBA recently deciding to hold the historic low of a 1.5% cash rate. But should we depend on a low-interest rate when making real estate decisions? Today we’re answering your questions about how rates could change over the next few years and whether an interest rate rise would affect Sydney’s upper north shore.

When will interest rates rise?

This is the multi-million dollar question. Financial forecasters can’t give us a concrete answer, but most agree that rates can’t continue at their historically low rate for much longer, and some are willing to predict an eventual rise to around 3% over the next few years. There are already signs that the first rise may be on the way with some of Australia’s major banks bolstering their loans by increasing their own interest rates.

How would a rate rise affect the upper north shore?

The effects of an interest rate rise would vary significantly across Sydney’s real estate markets. Plenty of homeowners would be hit hard, particularly if they’re already at their upper limit in terms of repayments. But there are a number of factors that would protect buyers in the upper north shore, including:

  • A higher proportion of downsizers with much larger deposits and smaller mortgages.

  • Overseas buyers who are looking to invest in developments and aren’t borrowing from Australian banks.

  • Buyers at the top end of the market who are far less reliant on mortgages to make their purchases.

Will a rate rise affect sellers?

This combination of downsizers, overseas investors and high-end buyers should protect sellers in Sydney’s upper north shore from any major impacts following an interest rate rise. While many still predict the bursting of Sydney’s real estate ‘bubble’, we don’t expect to see an instant buyers’ market in Ku-ring-gai following an RBA announcement.

At most, we may see slightly less frenzied bidding when it comes to auctions and perhaps a slight uptick in private treaty sales. But we definitely can’t imagine a wholesale move away from auction sales in an area that offers buyers so much in terms of location, transport, schools and lifestyle.

What should buyers keep in mind?

Prospective buyers looking to stake their claim in the Ku-ring-gai area may be tempted to wait for a shift in interest rates, but they could end up disappointed. Our advice is to buy on your own timeline, not the RBA’s, as rising rates are unlikely to have a major effect in upper north shore suburbs. When it comes to a market like this, interest rates are only part of the picture.


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