US Interest Rates Key to Oversupply in Property Market

US Bond yields have risen steeply, especially since Trump’s Presidency. Does this signal the end of low interest rates in Australia? And would this impact on our local property markets?

Roger Montgomery of The Australian comments that property prices are artificially driven by historically low interest rates. So the questions are: “How low can we go”? and “For how long”?

According to Montgomery – It’s time! It is now starting with particularly the Brisbane apartment market with another 5500 apartments completed and available since September 2016 and more to come (13300 by September this year). This is driving yield down. That is, the apartments are either empty or the rental return is lowering.

Lower return or yield and higher cost in interest means less investors are able to cover their mortgages comfortably and may look for more lucrative returns in other markets. Some will have no choice but to sell, especially if there is continued downward pressure on household income.

So the research questions are:

  • What are the current interest rates and do consumers’ feel they will rise, fall, or stay the same?
  • Would the interest rates influence consumers’ buying or selling decision?
  • Is there a current oversupply of properties or an under supply?
  • Does a perceived over- or under-supply effect the consumers’ buying or selling decision?
  • Are current property prices fair and will they rise, fall, or stay the same?
  • Do current property prices and forecasts impact on the consumers’ buying or selling decision?
  • Do consumers’ have a secure and high enough income to support their decision-making?
  • Are consumers’ household incomes likely to rise, fall or stay the same?