Buyer’s agent says keep interest rate rise in perspective

The headlines may be screaming doom and gloom, but one buyer’s agent said rising interest rates aren’t all bad news and purchasers need to keep things in perspective.

Aus Property Professionals Founder Lloyd Edge said the recent 0.25 per cent jump in interest rates could help trigger a slump in property prices, ease competition and make it a little easier to get a foot on the real estate ladder.

“It needs to be looked at in perspective,” he said.

“We’ve had the lowest rates in history, and it’s the first time in 12 years that rates have increased.

“In my parents’ generation, back in 1990, interest rates were 18 per cent, and when I started investing, they were 9 per cent.”

Mr Edge said it was inevitable that interest rates had to rise eventually.

“I think it’s probably a good thing for the market because it’s actually going to slow down the house prices,” he said.

“Interest rates rising can potentially help people get in because there’s less FOMO (fear of missing out) now, there’s less bias and less activity.

“House prices are probably going to dip in some areas up to 10 or 15 per cent over the next 12 months, and that’s going to make it a little bit easier to get in.”

The biggest falls are most likely to be seen in Sydney and Melbourne, but Mr Edge cautioned that Brisbane could also see a drop in property prices.

He said regional Victoria, NSW, South Australia and Tasmania would fare much better.

“Brisbane hadn’t really recovered from the GFC or the 2011 floods, and then all of a sudden, with the pandemic boom, there was heaps of growth,” Mr Edge said.

“People were really paying too much for property, and I think there’s going to be a little bit of negative equity.

“So I think Brisbane prices and certain suburbs will actually come off as well.”

Mr Edge became a buyer’s agent a decade ago after initially working as a music teacher. He got into property investing after buying a one-bedroom property to live in.

But he soon realised that he wouldn’t be able to create financial security for himself and his future family on a teacher’s wage.

Mr Edge, the author of Buy Now: The Ultimate Guide to Owning and Investing in Property, has 18 properties across Queensland, NSW and Victoria worth $15 million.

He said buyers looking for investment properties should steer clear of Sydney and Melbourne as yields in the two capitals were low.

“Try getting into a regional or coastal destination,” Mr Edged advised.

“We’ve seen a lot of growth in those areas and a lot of interest because of the pandemic triggering sea changes, but they have better cash flow, so that can help mitigate risk.”

Mr Edge also urged first home buyers to manage their expectations and climb the property ladder rather than looking to start at the top.

He said those looking to buy in Sydney should consider the western and southwestern suburbs where there were homes that were still relatively affordable, especially townhouses and villas.

“Head out towards Ingleburn, Glenfield and Campbelltown, and those types of areas,” Mr Edge said.

“Yes, they’re a long way from the beaches and a long way from the Sydney CBD, but that’s one of the problems first home buyers have, they want to live really close to the cosmopolitan lifestyle, but that’s what makes it expensive.

“The second property I bought was out there, and I had a long commute to get to work, but it was a sacrifice I made to get onto the ladder.”

He said another option was for buyers to rentvest, which is where you buy a property where you can afford to but rent and live in a better suburb.

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Kylie Dulhunty

Kylie Dulhunty is the Deputy Editor at Elite Agent.