The Reserve Bank’s decision to lift the cash rate by 25 basis points to 4.6 per cent is not ideal as Melbourne moves through the middle of its spring selling season and will place further pressure on household budgets.
Although the increase was widely anticipated, it is still disappointing. The Consumer Price Index rose 3.5 per cent in the 12 months to July, down from 3.8 per cent in June, although inflation remains above the Reserve Bank’s target range of 2 to 3 per cent.
Higher borrowing costs will affect what some buyers can afford and may force them to reassess their preferred location, property type or price bracket. Others may pause their search while they adjust their finances and gain a clearer understanding of their revised borrowing capacity.
However, families still need to move as their circumstances change. People have children, change jobs, separate, downsize or need more space, and while higher rates can affect their budgets, these decisions can only be delayed for so long.
Melbourne’s auction numbers were well down last weekend, but that result was heavily influenced by the AFL Grand Final. Volumes and clearance rates fluctuated in the preceding weeks, reflecting a market in which buyers remain active but are increasingly selective and conscious of value.
We expect quality homes in sought-after locations to continue attracting competition. Properties with good floorplans, access to schools and strong lifestyle credentials tend to perform well because genuine demand for great real estate does not disappear when rates rise.
There can also be opportunities in a more cautious market. Upgraders who are buying and selling under the same conditions may benefit from a smaller price gap between their existing home and the property they hope to secure.
Another rate rise will undoubtedly create short-term challenges, but it does not change the long-term fundamentals of property. Buyers and sellers who need to act will adjust their expectations, review their budgets and continue making decisions that suit the next stage of their lives.
For property investors, a rental increase can strengthen cash flow and help an investment keep pace with the market. But the amount is only part of the equation. Timing, tenancy history and the terms of the rental agreement can determine whether that increase is available now—or months down the track.
The Reserve Bank's decision to increase the cash rate by 25 basis points to 4.85 per cent is disappointing for mortgage holders, but hardly unexpected given the latest inflation figures.
A tired kitchen. Worn carpet. Walls that have seen better days. When an investment property becomes vacant, it can be tempting to renovate everything at once.
Would you hand the keys to your brand-new car to someone you barely know without making sure it was insured? It's a question we often ask investors when discussing landlord insurance.
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