How do Interest Rates Affect Property Investing ?

[digs75]

With another reprieve from the RBA yesterday to put interest rates on hold I am wondering how sensitive property investors are to interest rates increases ?

In my latest blog I posed questions as to reasons why some people why be nervous everytime the RBA meets to discuss rates and interested to get your thoughts on this matter.

cheers,

http://glloyd75.wordpress.com/2011/06/08/how-do-interest-rates-affect-property-investing/

 

[devo76]

I dont enjoy them but i can handle 10%+ before i have to make any changes.
I would say everyone is sensitive to them. Just some more than others.
Some start to implement exit plans while others get exited about buying oportunities.

It comes down to each individuals buffer/risk tolerance.

 

[Peter_Tersteeg]

At this point I don't think a rate rise, perhaps two (up or down), will make a huge difference.

Certainly it has been my experience that when interest rates reach extream levels it has a dramatic effect on the market.

A few years ago rates got to the point where they were effectively 9%+ to the consumer. Lending almost ground to a halt. Several months later rates plumited down to as low as 5%. At this point demand for money became so high that it created a boom year in property and lenders had to intervein themselves to protect their position for when rates go back up.

Personally I think rates are at a stable point right now. I'd love it if they were a bit lower, but the cost of money doesn't appear to be either too affordable or too unaffordable from where I'm standing.

 

[The Fence]

I dont enjoy them but i can handle 10%+ before i have to make any changes.
I would say everyone is sensitive to them. Just some more than others.
Some start to implement exit plans while others get exited about buying oportunities.

It comes down to each individuals buffer/risk tolerance.

Kudos !!

2 paragraphs totaling 4 lines of absolute gold right there.

 

[BayView]

I think the combination of the market sentiment now, and another rise or two this year would have serious effects.

Not just on property, but on all activity related to the everyday lives of people - especially consumerism.

 

[BV]

Higher interest rates to the general population mean lower borrowing capacity so property investing will stop and consumer spending will reduce to the very essentials.

However, I find it hard to believe that the RBA will increase rates further because Business activity is already down and with all the carbon tax cr@p and all costs of living going up daily, things are going to get worse before they get better.

Personally I'm not sensitive to IR movements.
I'm growing my portfolio but I have much better cash flow and lower exposure than 2007.

 

[Doovalacky]

Before I move I calculate on 10% interest. If I can not handle that well its time to rethink the strategy. I rode out the last round of hikes nicely and continued to pay at the same rate when it dropped.

I know of far too many that refinanced continually to their limits and lost all when interest rates jumped. I remember my PM contacting me as a build and sell developer had 5 properties he had to sell at less than cost asap or he was bust.

I'm about to build again myself but even there I am keeping options open. If I decide one option pushes my finance too much I can drop to an less ambitious plan.

 

[Rolf Latham]

I think the combination of the market sentiment now, and another rise or two this year would have serious effects.

Not just on property, but on all activity related to the everyday lives of people - especially consumerism.

I recall it was one of the US presidents that once described Recession as people hoarding their money instead of spending it .............I thought this was a good, simple definition.

ta
rolf