There’s certainly a lot of commentary currently about the property market. The recent move from the Reserve Bank Of Australia to lift interest rates by 0.5% has created quite a stir; the question is how much of it is actually factual and how much is designed to sell newspapers?

There’s no denying that interest rates are on the rise but after the longest continuous period of downward spiralling rates, does this really surprise anyone? Or did we all have our heads in the sand thinking that interest rates would be practically zero forever?

#wishfulthinking

The last interest rate rise was in 2011, so I can understand why some people may be a little uneasy. It’s been so long, and it’s hard to remember what impact it may have on the market.

The media do a good job of exaggerating the problem, given interest rates will remain very low in a historical context. I fear that the hype of an interest rate rise is having a more significant impact than the rise itself.

We’ve Heard All This Before

The current market conditions are perfect for absorbing these rises and continuing to build wealth through residential real estate.

For those who have been in the market for some time, you have seen and heard it all before. But for those who haven’t, it’s important to know a few key things about the property market.

Interest rates go up. Interest rates go down.

Inflation goes up. Inflation goes down.

House prices go up. House prices go down.

All of this is cyclical. For example…

The Greatest Ever Property Crash

In 2000, many Australian’s were spooked by the threat of “Australia’s greatest ever property crash”.

What triggered this? A little thing we now know as GST. But yes, you guessed it, the crash never eventuated.

Our team tracked down a graph detailing house prices in this period to provide additional clarity to what transpired.

As you can see in the graph below, there was a slight dip in house prices mainly due to fear due to the media hype, followed by one of Australia’s greatest ever property booms. Property investors enjoyed sustained growth from 1998 through to 2007/2008 in all major capital city markets.

Many forget this period of strong growth due to the global financial crisis that followed in 2007/2008. But even the impact of this was not felt like in many other countries due to Australia’s much stronger financial fundamentals and robust financial policies.  

The Word on the Street is Inflation 

The other buzzword thrown around in most headlines is “inflation”. History is often the best teacher, and for those with good memories may recall inflation running riot in the 80s.  

From 1982 to 1987, inflation rose sharply but so did rents and property prices. Some capital city markets rose by 150%, while rents across the nation increased by an average of 130%. 

Be Careful of Armchair Experts 

The doomsday merchants have crawled back out from under their rocks. It’s been a while since we have seen them – you might recall their last prediction of a 40% crash at the start of the pandemic.  

These armchair experts seem to think a rise in interest rates coupled with rising inflation triggers a property market crash. 

As I stated above, the property market is cyclical and what we are experiencing is nothing new. Ultimately successful investing comes down to the fundamentals. There will always be intermittent shifts that can affect the market but purchasing with the correct fundamentals in place will put you in good stead for success.  

Property is all about the long game.  

It’s important for investors to block out the white noise of the media and continue their path for a more secure financial future.  

Your future depends on it.