What Does the RBA’s Cash Rate Hike Mean for Property Investors in Sutherland Shire?
The Sutherland Shire property market is no stranger to twists and turns, but with the Reserve Bank of Australia’s (RBA) recent cash rate hike, it’s facing a new challenge. On 7 November 2023, the Board opted to increase the cash rate target by 25 basis points, bringing it to 4.35 per cent. It’s the 13th rate increase since May 2022.
Following a period of steady rates at 4.10 per cent for four months, the increase was widely expected due to September’s 1.2% inflation. According to Governor Michele Bullock, progress in reducing inflation seems to be moving more slowly than expected. The decision to increase aims to address this ongoing issue of sustained inflation, that is, to keep the inflation within target.
Curious about how this cash rate hike might affect the property market in Sutherland Shire? Here’s an overview of the situation, potential impacts and valuable insights for property investors in the region.
A Resilient Sutherland Shire Market
Sutherland Shire’s property market has shown remarkable resilience in the face of rising interest rates, increased living costs and changing consumer sentiments. The first half of 2023 has witnessed the RBA gradually increasing interest rates, with only a brief pause in April.
In total, there has been a cumulative 1.00% increase in interest rates this year alone. However, the local property market has not only weathered these changes but also thrived.
The rental vacancy rate in Sutherland Shire was 0.8% in Sep 2023, which suggests a tight rental market with high occupancy. You might also want to know that the median rent for a house in the region is $778 per week, while the median rent for a unit is $598 per week.
The Impact of Cash Rate Increase
Undoubtedly, the expenses associated with servicing a mortgage will increase. If you’re in the market for a new home, you might be hoping for a drop in property prices. However, as interest rates rise, the cost of your mortgage will also go up.
According to Finder’s RBA survey, the minimum income required to afford the average Australian house now stands at $182,000. For a unit, you will need about $129,731. To comfortably manage your mortgage when buying a house in Sydney, you’ll require an average household income of $261,773.
For a typical borrower with a $700,000 mortgage, the latest rate hike translates to an additional monthly expense of approximately $1,827 compared to their payments in April of the previous year.
While the Sutherland Shire property market has displayed unexpected strength, it’s challenging to predict the exact consequences of the interest rate hike. One possibility is a decrease in demand for properties, which could lead to a decline in property prices. However, our local market’s resilience in the past suggests that stability might prevail. It’s a waiting game for investors and buyers alike.
For property investors in the Sutherland Shire, rental yields are a vital factor to consider. With the recent cash rate hike, these yields might just come into focus. The increase in interest rates could potentially lead to a rise in rental yields. But this outcome depends on various factors, including the supply and demand of rental properties in the area.
If higher interest rates deter potential buyers from entering the market, there may be an increased demand for rental properties. This can lead to higher rental yields, which can potentially benefit investors. On the other hand, lower demand could put downward pressure on rental prices.
Keeping an Eye on the Market
The RBA’s cash rate hike has injected a new element of uncertainty into the property market in Sutherland Shire. While the exact outcome remains unclear, the resilience of the local market suggests that it might withstand the challenges.
It’s worth noting that Sutherland Shire’s property market has been through ups and downs before and has consistently proven to be a sturdy contender. With its stunning landscapes and unique charm, it remains an attractive prospect.
If you are a property investor in Sutherland Shire, consider keeping a watchful eye on the market, stay informed and remain adaptable in your approach. Understanding the broader economic trends, local property market conditions and rental property dynamics is essential. The property landscape can change, but being adaptable and well-informed is your best asset to make well-informed decisions.
At Hill & Viteri Property, we understand the unique challenges and opportunities presented by the ever-evolving property market in Sutherland Shire. With our years of expertise and local knowledge, we’re here to guide you through these uncertain times. Contact us today and let us assist you on your property investment journey.