Buyers’ next move

THE first interest rate rise in 12 years, and of many we expect to come, is not all bad news for those who use real estate as a tool to grow their financial net worth.

As interest rates go up, a borrower buyer will be re-rated by banks. Bottom line, the higher rates go up, the less you can borrow, and the less you can borrow, the less you can purchase.

The result is that prices decline as buyers can’t pay the vendors price even if they want to.

So here is the opportunity that many savvy property speculators adopt, but of course comes with risk. They sell now, while rates have not gone too high and then set themselves up to be a buyer when rates are higher and there is a lot of stock on the market. In short, cash is king in this market. There is a glimpse of opportunities starting to emerge right now.

The election undermined prices as vendors delayed listing in May, but this delayed stock should hit the market this month and be the first of the good buying opportunities. This should continue through the rest of the year.

Where there is upside, there is risk, and the risk is that you sell and can’t find something or prices don’t drop or even go up (unlikely).

As a seller, asking for a long settlement will give some breathing space. If you’re keen to buy and sell within a few months, put a 12 week settlement in your contract.

However, before you get super excited or think this strategy will make you millions, remember that it’s highly unlikely we are going to see prices collapse. They will be adjusted by maybe 10 per cent.

And even if rates go up 2 or 3 per cent, they are still very low.