With Australian interest rates rising, what does this mean for property investors during 2024? Is it a good time to invest, or should the savvy investor hold off until interest rates fall again? Let’s look at some key points for Aussie property investors to consider.
The Current State of Interest Rates
While currently sitting at a mere 0.10%, the Reserve Bank of Australia is planning a series of interest rate rises over the coming months. While no one can predict exactly how many interest rate rises, there will be, or by how much, we can count on the that there will be rises on the horizon, most likely commencing soon after the Federal election and beyond.
The first quarter of 2023 has seen inflation hit a 13-year high. The Reserve Bank hikes the interest rates as inflation rises to counterbalance this. Interest rates have remained extremely low for the past few years but are expected to return to a more “normal level” in the months ahead.
As a property investor, you’ll want to keep a keen eye on interest rates, how they are reflected in the home loan deals the banks and other lenders offer, and how they affect your current property portfolio and any future investments you have planned.
Will Property Prices Rise or Fall in 2024?
Only someone with a crystal ball would be able to predict the answer to this question accurately. Besides, the situation is more complex than that. Australia isn’t just one property market but rather a nation divided up into numerous segments in every state.
To become successful or remain successful as a property investor, you must continually do your due diligence and maintain your finger on the real estate pulse at all times. In some parts of the country, housing prices will increase, while they will be on the decrease in other locations.
Regularly researching the market to determine where the hot spots currently are for investors is paramount to smart investing and ultimate success. Likewise, if you have properties in your portfolio already, you’ll also want to maintain a diligent eye on those markets to determine whether a particular property is worth hanging onto or whether you should sell up and use the money to purchase an investment property in greener pastures.
There are interesting times ahead, and in a volatile housing market, opportunities abound for property investors who have a keen eye for a good deal and the nous to make a bold move when the timing is right.
Should You Enlist the Help Of a Property Investment Consultant?
If you are new to property investing, getting assistance from an experienced investment consultant could prove invaluable, setting you off on the right path from the beginning of your investment journey.
Even experienced property investors can benefit from the expertise a quality property investment consultant can provide. For example, even though you might already know what you’re doing, you may not always have the time to put into researching the current state of the property market, where the investment hot spots are located, and so on. The property investment consultant’s job is all about keeping abreast of current events and the real estate climate. Their business continuity depends on being armed with this valuable knowledge to pass on to clientele.
An experienced investor or not, you won’t want to team up with just any investment consultant. Firstly, you’ll want a consultant specialising in real estate investing, and you’ll also want to find one currently investing or with previous investment experience. There are many experts in the world who can talk the talk, but when it comes to investing your hard-earned cash, you’ll want a consultant who can prove they can (and have) walked the walk.
Rental Properties Are In High Demand
Although the future of official interest rates remains somewhat cloudy for the time being, what is clear is that there are certain areas of the country that have experienced a boom in renters. Locations such as the Gold Coast and key areas of Sydney have seen rental properties being snapped up so fast that it’s now difficult for new arrivals to find a place to rent.
Rental properties being in high demand is always great news for property investors. Many investors invest money in real estate to draw a passive income from renting those properties out. If you are looking for a new property or two, then research areas of the country where rental properties are currently scarce. You’ll almost be assured of having your investment properties leased instead of sitting vacant for a time.
One of the drawbacks of property investing with a view to receiving regular rental income is periods when your properties have no tenants and are therefore costing you money rather than generating a consistent income.
The Sunshine Coast has been experiencing a housing and property boom in recent years, so searching for investment opportunities in this location is something you won’t want to overlook. In fact, the Sunshine Coast is one of Australia's major growth areas at the moment, offering many opportunities for the smart investor to secure valuable rental properties that are likely to remain leased instead of sitting vacant.
One thing you’ll definitely want to research before committing to a purchase is the current rental rates in any given area that interests you. For example, rental prices in parts of Melbourne have been dropping recently, while in other areas like the Gold Coast, the cost of rent has been increasing. If you can find an investment property for the right price, a reduction in rental prices may not have an impact but more than likely, you’ll want to secure a property in a location that is attracting a higher rate of rental income and also consider having landlord insurance.
Higher Interest Rates Can Lead to a Rental Property Surge
While the prospect of an increase in interest rates looming from the RBA sounds like bad news for property investors, that’s not always the case. It depends on which perspective you view it from.
When there is an increase in interest rates, it can cause the mean price of the housing market to go up. Add in the fact that the banks and other lenders also increase their interest rates, and purchasing properties, whether it be a home or an apartment, becomes a more expensive proposition on two levels. This equates to prospective home buyers putting off purchasing a home until prices improve, yet these same people still need to live somewhere, and that’s where the savvy property investor comes in.
If you purchase an investment property in a growth area where rental properties are in demand, you’ll have an influx of potential renters lining up to lease your investment property or properties. The cost of purchasing the property may be a little higher than previously, but it will also likely attract a higher rate of rental income to offset these cost increases. Better yet, your investment property is not likely to remain vacant for an extended period. Chances are, it will be snapped up as soon as it is advertised.
Is It a Good Time To Buy and Flip Houses?
The answer to this question really depends on where you buy a property in the current climate. While housing prices have been rising in many areas across Australia, there are locations where the prices have been decreasing. If you can determine when prices have reached the bottom of a trough and buy before they start to climb back up again, then 2023 and 2024 can be a great time to buy investment properties with a view to flipping them for a profit.
This is something where it will pay to spend time doing your research, and it could be an occasion where you’ll want to enlist the help of a quality property investment consultant if you don’t have the time to do the research or you’re simply unsure about anything.
Buying and flipping houses have always been a prime way for investors to make profits on capital gains, and there has been a lot of buying and flipping over the past few years while interest rates have remained low. With the impending rise in interest rates looming over the horizon, buying properties with the goal of flipping them will need to be considered much more carefully, but there remain many opportunities out there to make some nice capital gains over the next few years.
The Takeaway
A likely increase in interest rates will change the property investor’s playing field over the coming months and years, but it will also present the wise property investor with new opportunities to make money from rental income, as well as buy and sell for a profit.
