Winning with the Cycle: How You Can Prosper with the Changing Interest Rate and Property Cycle: 4 Elements

Prosper with the changing interest rate, taking advantage of lower interest rates and house prices is a key way you can thrive and profit from property today. Historically low rates are a sign, says Vision Property & Finance’s Dave Lennox. Property buyers and real estate investors should be thinking about getting into property once again. Opportunities like those available now are starting to look attractive.

Prosper with the Changing Interest Rate: Buyer’s borrowing power boosted by lower rates

“Interest rates going down will help with people’s borrowing capacity. Generally, the way banks assess things, with rates going down they will tend to lend a bit more. So, if 12-18 months ago, a property might have been slightly outside your repayment budget, with the decline in interest rates, you could now find that property may fit within your repayment budget. This is why the rate drop may improve borrowing power.”

Dave says the interest rate story is matched by some easing of regulation-led tightening that has taken place over recent years. Some of the regulations introduced to contain the property market are being relaxed.

“There have been some other things going on with lending, such as restrictions on investment lending but this is now easing and the drop in rates are contributing to the borrowing environment being a littler looser than in 2018 when the authorities (RBA, APRA and Govt) were more concerned about property risks and tightened access to credit.”

Property cycle brings good news to investors as well as residential buyers

Dave says this has given borrowers new-found optimism when it comes to getting into the property market. Through moderating property prices and easing interest rates, more and more hopeful property owners will be more likely to be able to own their own home or investment property.

Dave says moderating property prices may make real estate more desirable for property investors. When property prices decline, the yield (% of rental income to the property value) will often increase, especially where investment properties are in desirable locations where rents are holding up well.

“The property cycle changes have witnessed moderating prices in Sydney and other capital cities. This often makes good yielding properties more attractive for property investors. Instead of earning very little interest by putting money in a savings account, property investing starts to become a solid option as part of someone’s financial plan.”

Time to act for buyers and investors

Residential borrowers and real estate investors may only have a small window of opportunity over the next few years to take advantage of price moderation and lower rates. Dave reminds people that lower rates won’t be here for the long term, and eventually, the cycle will turn around as the property market stabilises and the economy regains its strength.

“Lower rates are probably here for the short to medium term. Once the RBA has achieved what it wants in getting the economy firing again, they will likely begin to tighten monetary policy so the economy doesn’t overheat. That will mean interest rates will start to edge up.”

“By the time we see rates rising, the economy will be doing much better, and property prices will likely be increasing again. Home buyers and property investors will probably have a short time to act while moderating prices and lower interest rates combine to make this a good time to think about property.”

Buyer’s Have Time

Dave stresses that buyers do have time on their side. Without the pressure of an immediate threat of rapidly escalating prices, buyers can afford to take the time to get things right.

“Very much it is a buyer’s market. Whereas previously in our booming property market, buyers may fear rising prices could jeopardize their purchase process, now they have time on their side to go through their approval process properly, get some good advice, and really make good decisions. This means, whichever way they go, buyers can be confident they have made good decisions.”

If you are ready to prosper with the changing interest rate, contact Vision Property & Finance and discuss your property goals with one of Vision’s expert team.

Contact us here, or ring us on 02 8354 3000.

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