In one of the current housing market’s worst ironies, the people likely to be slugged hardest by the latest interest rate increase are those who don’t actually own property
Renters already face a dire shortage of accommodation, with vacancies at rock-bottom levels, and now it’s predicted that many investors will try to pass onto them all, or some, of the extra cost of having a mortgage.
“With market conditions so tight, and vacancy rates so low, tenants may not have too many other alternative properties to rent or, if they’d been saving up for a deposit, then it’s now going to be harder for them to buy. And, in the longer term, the higher rate could lead to a fall in the property market and less construction, which could tighten the rental market even further.”
RateCity research director Sally Tindall said in those areas where there are already shortages of rental accommodation, tenants may find themselves “throwing more money at rents” to keep their homes.“I think they could find their rents going up as a result of the rate rise, particularly in areas of Sydney or Melbourne or anywhere across Australia where the rental situation is dire,” she said.
“If the investor needs the cash flow to replay their mortgage, they may be very sensitive to rate rises and want to pass on the extra costs,” she said. “But if they’re already negatively geared, then they might not be so fazed by the rise.“Certainly, those tenants who are coming to the end of their leases will be at greater vulnerability to higher rents.”
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