Recent interest rate rises are likely to trigger widespread rent increases as demand for residential property grows and landlords move to recoup added home loan costs.
It is estimated that in order for landlords to cover increased home loan costs for a 0.25 percent interest rate rise:
- Rents on properties worth $300,000 would need to increase by about 4.8% ($12 per week, assuming current weekly rent of $250).
- Rents on properties worth $500,00 would need to increase by 5.6% ($25 per week, assuming current weekly rent of $450).
- Rents on properties worth $750,000 would need to increase by 6.2% ($40 per week, assuming current weekly rent of $650) These increases are on top of general rental increases, averaging more than ten percent annually.
The interest rate rise isn’t great news for principal buyers, but it is the latest in a series of positive developments for investors.
The current climate of rising interest rates, tightening rental markets and land shortages continues to make the residential property market attractive to investors.
To get a better home loan deal, talk to your local mortgage broker.