Written by Killian Jeffrey
Current Outlook and Strategic Opportunities
As we’ve all seen over recent months, interest rates play a significant role in shaping the property market. From influencing buyer affordability, to affecting borrowing power and investment decisions, the consistent interest rate escalations have certainly played a noteworthy role in defining the property market we see in the current day. This report examines how rising interest rates have impacted the housing market, and provides insights into the current market outlook. It also explores the concept of strategic property buying and the importance of long-term perspectives in making informed investment decisions.
Impact of Rising Interest Rates
Decline in House Prices: The housing market experienced a notable decline in house and land prices, reaching around nine percent at its peak. This decline can be attributed to the reduction in borrowing power resulting from rising interest rates. It also necessitates the need for some investors to sell properties as they are squeezed elsewhere. This increases the supply and hence reduces demand. However, it has created opportunities for buyers with strong cash flow and increased affordability for certain segments of the market.
Tightening of Servicing Requirements: Banks have implemented stricter servicing requirements, making it more challenging for borrowers to secure loans. This has led to a more cautious lending environment and a need for buyers to demonstrate stronger financial stability and servicing capacity.
Current Market Outlook
Interest Rate Projections: Hudson’s prediction is that the cash rate is expected to approach nearer to the 5% mark before stabilising. Although this represents a significant increase, historically, it is not an excessively high cash rate. It underscores the importance of considering interest rates within a broader context and evaluating the long-term implications rather than focusing solely on short-term fluctuations.
Strategic Property Buying: Warren Buffett’s famous quote, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price,” holds great relevance and is strongly embraced throughout the property market as well. The core principle is to focus on identifying the right property that aligns with individual goals and investment strategies instead of waiting for the “perfect time” to buy. It is important to recognise that there is no one-size-fits-all property, as each individual’s needs and preferences vary. Building a diverse property portfolio can offer a range of benefits tailored to individual circumstances.
Cash Flow and Servicing Ability: If buyers have strong cash flow, secure income, and the necessary servicing capacity, the current market conditions present an opportune moment to capitalise on available opportunities. Strategic buyers can leverage their financial position to secure properties that align with their long-term investment objectives.
Long-Term Perspective: Instead of attempting to time the market based on cyclical fluctuations, taking a long-term view is essential. By considering personal circumstances, financial stability, and the right property fit, buyers can make informed decisions that align with their goals while others remain on the sidelines.
The effects of rising interest rates on the property market are evident, with declines in house prices and tightened lending requirements. However, the current market outlook presents strategic opportunities for buyers with strong cash flow and the ability to service loans. By adopting a long-term perspective and focusing on acquiring the right property at the right time, investors can position themselves favourably in the property market. Making informed decisions based on individual circumstances and financial capacity is crucial for achieving long-term success in property investment.
Hudson have more than 30 years experience in property. If there is any scenario or cash flow that you would like to consider just email me here email@example.com There is nothing we haven’t seen or helped with in property, even small developments we can help get you started with. It’s good to get a second opinion on property, or a third and fourth.