September Rental Market Update
I’ll admit I’m a bit obsessed with interest rates and how far they can fall. I use to think zero was the limit but it turns out it is not.
Negative interest rates have been available in Europe since 2014 apparently. The talk of the RBA dropping rates to these levels proves that nothing is off the table when it comes to getting the economy going. However, if you are a property investor, this could get really interesting (ok, pun intended).
A property’s rent well and truly covers the standard outgoings but rarely the mortgage’s interest payments as well unless the loan is relatively small. Banks are now particularly interested in attracting and holding borrowers who have a loan to value ratios (known as LVRs) of less than 60% and are offering extra discounts to win your business.
If mortgage interest rates fall to zero or near it, we could reach a point where much of Sydney investment property could be generating positive cashflow. This used to be the strength of regional property investment but never Sydney property.
In the past, people sold their investment property when they were retiring and invested the money to generate an retirement income.
Maybe that could change and residential investment instead could become an acceptable income generator.