Yesterday's 0.25% interest rate rise will have only minimal impact on the overall residential sector with many purchasers having already factored in a rise, according to national, independent property advisers and valuers LandMark White.
However, according to Landmark White’s NSW managing state director Tim Gavan it will impact on affordability, which is at its lowest level since June 1996 and especially at the upper end of the medium density investment unit market.
“Large expensive studio and one bedroom units will suffer more as higher rentals will need to be obtained in a rental market with very little if any rental growth,” Gavan says.
Landmark White says that with an average home loan now $187,542 (REI), which is an increase of 13.8% on a year ago, rates, would need to rise approximately one% in a six to eight month period to cause any significant impact on residential demand and prices.
Gavan said that is what occurred in 2000.
“I think the RBA will adopt a wait and see approach before there is another increase to see the real effect of rate rises on the higher levels of debt that exist now,” he says.
“With higher debt the RBA won’t have to go as far as it has in the past and it might be that a rise of another 0.5% in total will be enough to take the heat right out of the market and ensure a softer landing than anything above 1% might achieve.
“Our major banking and lender clients are more increasingly worried about the investor and small medium density unit market and are requiring more in-depth research before considering to lend on a development.
