Interest Rate Rise Affects Renters too

Those renting while saving to buy a home will be the worst hit, with demand for property this summer expected to match, if not exceed record levels of demand recorded last year, insiders say.

“Rising rents of late have definitely been due to, or impacted upon by rising interest rates,” says Danielle Cargill, manager – property management department at Cantwells Property in Hawthorn. “Owners of these properties need to bump up the returns they are getting, to enable them to easily cover their own costs.”

And easily cover their own costs they can.

Assuming an investor owns a $350,000 2-bedroom inner-city apartment, with a $250,000 mortgage, this week’s interest rate rise means an increased monthly cost of about $52 per month – or about $12 per week.

At current market levels, that property would ordinarily ask about $260 per week. However with rental auctioning and 100-strong crowds for some type of rental properties, an asking rent of $270 or even $280 is not unreasonable.

Ms Cargill says she expects most investors will pass as much, or all of the recent interest rate rise effects to renters, to capitalise on the strong market.

“There’s no indication the interest rate rise will slow private investors in this part of the world,” said Ms Cargill. “Most of the investors we deal with here have been factoring in one or two interest rate rises in the short term anyway.”

 

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Marc Pallisco

A freelance property analyst and journalist, Marc is a co-founder of realestatesource.com.au.

Marc Pallisco

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