Has the market reached tipping point?
Interest rates rises will make some markets tip over, but others are likely to firm. If in a suburb such as Caroline Springs, around 8% of the real estate is owned by investors and more than 90% is owner occupied. Of the owner occupiers almost 70% are still paying a mortgage. This means most people in those areas feel a direct impact from an interest rate rise.
Compare this with a suburb like Prahran. In Prahran only 17% of people living there are paying off a mortgage. Investors won’t feel the full force of an interest rate rise because as interest rates rise there is more pressure applied to rental demand and rents are forced up. In addition, up to 45% of any interest rate rise can be offset by negative gearing.
Other areas that are dominated by investors and as a result do not feel the impact of interest rate rises are likely to firm up and continue to grow. Demand for property in these areas will increase as the sharemarket remains so unstable.
Flats 4 us!!!!
Take care guys…
