Rising interest rates don’t just mean that the people with the mortgages and home loans have to pay more. Sometimes I forget that an interest rate rise has a flow on effect; it’s likely to start leading to rises in rental costs as well.
Obviously if the repayments on an investment mortgage start to rise, the investor wants or needs to recoup those extra costs somehow, and the most obvious way to do that is to ask the tenant for more rent. Predictions are that this will happen on a wide scale this yesr, particularly after five rises in interest rates in the past half year or so and the very likely prospect of the Reserve Bank deciding upon a couple more rises in the coming months, too.
The director of property management at the large real estate company Ray White is suggesting that 2010 might be an expensive year for tenants. He predicts that landlords will raise rents by around twenty dollars per week over the rest of the year. This might push a few renters into entering the property market for themselves, but many people rent because they can’t afford a mortgage, or can’t save up a deposit, so this will just leave them more out of pocket.
In fact, recent research suggests that Australia might be moving towards being more of a “rental society” rather than everyone trying to follow the dream of having a mortgage and buying a house – as housing gets less and less affordable, the prediction is that more people will rent and they will have longer term leases. Of course, that means the investment market will get bigger too, although there might be more interest in houses being available to rent than units, another difference from the past. Basically it all means that things are changing – so before you make decisions on renting or buying, either for yourself or for an investment, make sure you do your research on the trends of the future.