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i see the steady eddie approach, there is still a shortage, and the interest rates are still very low, but if folks panic " media related" they will sell !
more homes on the market allows people to negotiate a lower price, as the prices adjust to the buyers market perhaps they will drop slightly, but i don't expect any thing to happen untill the rates get back to 6&7% ish, ?
just my thought on it.
With interest rates on the rise ...do you think house prices will fall or rise?
In the meantime....I sniff blood in the water shortly....
A lot of people will panic when they see another rise in Dec. 2009.
The average punter out there is pretty unsophisticated...and will not analyze the underlying fundamentals.
Given previous experience housing price growth will slow next year...till about 2011 when rates slowly head down. late 2011 - early 2012....should be good for growth if the rates come off again.
In the meantime....I sniff blood in the water shortly....
In the meantime....I sniff blood in the water shortly....
With interest rates on the rise ...do you think house prices will fall or rise?
, you'll be waiting a very long timesniff blood in the water
Wow.....interest rates are still well under what they were less than 12 months ago and people are talking of 'blood in the water'.....interesting
Explain to me why you think even another 1% increase would get people bleeding? Interest rates were around 9.5% only 12 months ago, yet a .25% increase from current 5% rates prompts talk of histeria and forced selling? Hmmmm maybe Im missing something here...? You guys need to apply to Today Tonight
I think they will continue on their present path - which is continue to rise.
IR rises do 'spook' the market. This lasts all of about 2 weeks before people realise that the sky did not cave in after all. Then they get back to business as usual.
When banks assess a borrower's capacity to service a loan, they do so with a rate of 2% higher than the current variable rate (the "assessment rate"). Therefore, FHBs and others who have taken out loans when home loan IR was 5% should be able to tolerate IRs of 7%. That is years away into the future at the moment, (that is, getting to 7%).
For those of us that already had loans past 2 years ago - we were already paying 7, 8 & 9% back then. If our loans are still the same value now, we know we can already handle an increase of 2 - 3 % as we've been there, done that.
The underlying fundamentals have not changed. Immigration is still high. We still are not building enough houses. Rents will increase. Demand is still exceeding supply. etc etc
If you want to look for an excuse as to why not to buy now or to hold off buying now, you can always find one. Here's a couple I've heard:
1. Wait until the FHOB expires - less competition from FHBs. Yes, but more competition from other investors
2. Wait till interest rates drop further. Well they just went up by 0.25% yesterday
3. Wait for prices to fall 40%. Well they went up by around 10% in the last 9 months
4. Wait to see if I still have a job. Well unemployment did not get anywhere near what was predicted. etc etc
At the risk of being labelled a 'property bull', 2 years ago we were all paying a minimum 2% more in IRs than we are paying today....and it looked like we were heading towards 10% IRs by 2011. Some people started locking in fixed rates of 8.5% & 9% because, amongst other things, they could afford it. Nothing has really changed as far as I can see.
So what have we all been doing with the extra cash we've had? Some will have saved, some will have paid down debt - both good and bad, some will have purchased consumer goods like TVs & cars etc. These last things are the items that will suffer with an IR increase IMO. If people have less disposable income then the discretionary spending gets hit - not housing. Australians (and their politicians) love housing. We'll do anything to 'save the house', take a second job, whatever.
When some households were in mortgage stress they took the decision to sell. Most of these 'mortgage stress' sales have happened now. I think if you wait to , you'll be waiting a very long time
Meanwhile, there are risk minimisation strategies that can be engaged in. My personal favourite is buying in metro & large regional areas - but properties with 7-8% yield.
In turn, prices should come down by a very small amount as there would be a slight decrease in demand and certain price points.
For more expensive stuff, this cant be good - we'll realistically see 50% increase in repayments for people over the next two years. Thats a lot of potential CG eaten up (or a lot of the recent CG has been due to the cuts).
Having said that, I still think the best value will be at the upper end of the market, higher IRs should cause prices to fall further as there will be even less demand than there has been in the last 12 months.
I've seen prices rise quite decently in certain parts of the inner west over the last 8-9 months. So, my guess would be that those who over-committed themselves to get into the market at higher prices will be those who may be forced to sell in the next 6 months when IRs hit around 3.75 - 4.00%.