Recently, I have heard a lot of people saying that they were going to hold off until the interest rates rise and house proces soften.
To me, this is an expensive gamble.
Firstly, the gambler is betting against the natural movement of the market. Markets generally move upwards over time and have done in Australia for many years.
Many factors influence a market to rise or fall over time but it’s normally a combination of factors working together to have an effect. Normally one factor of influence in isolation won’t have too much effect on the market.
In the 6 year period from 2002 to 2008 there were 22 increases in the interest rate from 6.5% to 9.5%. During this time, 6 out of the 8 capital cities doubled in price.
Perth having increased 147%. Admittedly, way more than it could handle but the fact still stands that interest rate rises have shown to have less effect in the past than the media would have you believe.
Sometimes it’s not as cut and dry as noting a citing a direct correlation between rate rises and house prices. Human emotion comes into play, which translates into market sentiment. As well as affordability, which is the relationship between income, cost of debt and the current price of houses in a market.
The WA market is at an incredibly high level of affordability at the moment, with the median house price at around $527,000 (REIWA) compared to Sydney at $1.39m. Our average wages are slightly higher than in Sydney which paints a picture of the disparity of affordability between the two cities.
Predicting the market is a complex beast with many layers affecting the outcome. But I always advise my clients to stick with the fundamentals. Long term investing can be boring and the common sayings such as ‘time in the market rather than timing the market’ will always ring true in the long term.
