Just as the Melbourne Cup creates winners and losers, there will be winners and losers from the RBA’s interest rate rise on Cup Day.
The undoubted winners are the big banks, some of whom will use this opportunity to lift their rates even higher than the 0.25% flagged by the RBA.
Another rate rise past the post
Just as the Melbourne Cup creates winners and losers, there will be winners and losers from the RBA’s interest rate rise on Cup Day.
The undoubted winners are the big banks, some of whom will use this opportunity to lift their rates even higher than the 0.25% flagged by the RBA.
The expected losers are those in debt, for whom the prospect of increased repayments coming just before Christmas is a burden they can well do without.
What will the impact be on the housing market? The latest Residex figures show that the Australian property market was in limbo during the September quarter, with a small overall fall in house values compensated by an almost equally small rise in unit values. Most of the falls in house prices occurred during the month of September, with the worst affected being Brisbane and Adelaide. Conversely, small rises occurred during the month in Sydney, Canberra, Perth and Hobart.
Generally, rate rises affect first home buyer market areas much more than well established areas where the amount of home buyer debt is lower. Is there any light on the horizon for first home buyers? One solution is for buyers to become more selective about their choice of a property, rather than put off their purchase altogether. If you are a first home buyer, think about trading off position and attributes in exchange for a property that has greater prospects of improving in value through renovation or other improvements. In this way you can gain much more from the growth in your home’s value than the cost of renovations plus any increase in repayments are likely to cost you.
There are many such homes available on homesales.com.au and Residex also has a new report out this month which shows buyers the potential amount by which home renovations can increase a property’s value for any street in any suburb.
By John Edwards
Residex CEO
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November 2010
