Real Estate News - Housing market can take the hit, experts say ( Australia)

HOME buyers will absorb higher interest rates and there will be little impact on Melbourne's strong residential property market, industry experts say.

As the Reserve Bank yesterday announced a quarter-basis-point rise in interest rates — the fifth since 2004 — Real Estate Institute of Victoria chief executive Enzo Raimondo said the Melbourne market was largely immune.

"I don't think we will see too much change, especially in the auction suburbs, which are generally the middle and inner suburbs," he said. "Those properties (now listed for auction) have been on the market for weeks and people will have made the decision whether to buy or not, irrespective of the interest rate rise."

Mr Raimondo said auction clearance rates, which last weekend were 89 per cent, were likely to remain above 80 per cent.

South Yarra-based buyers' advocate David Morrell agreed it would be business as usual at the top end. "There will not be a blip on the radar," he said.

But the outer-suburban mortgage belt would feel the squeeze, Mr Raimondo said.

"This is the fourth interest rate rise in just over 12 months, which adds another 1 per cent to the mortgage rate," he said. "This will have some impact on some of the middle suburbs but a more immediate impact on the outer suburbs, where you have got mortgages that are nudging 35 per cent of the household income and people are stretched already.

"It's not a pretty picture for some people, especially those who have bought in the past 12 months to two years who are struggling. And it's certainly not good news for first-home buyers because this is just one more obstacle preventing them from getting into the market."

Barry Plant, from one of Melbourne's largest real estate networks, Barry Plant Real Estate, disagreed.

"The pent-up demand on this market is frightening and nothing is going to change from that point of view," he said. "(The rate rise) will not take buyers out of the marketplace — it might shift buyers but it won't take them out. This is the very thin layer of icing on the cake."

Mr Plant said the biggest deterrent for first-home buyers was rising property prices driven by increasing demand, especially from cashed-up immigrants from South Africa, Britain and Europe, and locals buoyed by full employment and spooked by high rental prices.

"That's more a problem for the market than a quarter of a per cent lift in rates (and) it's very difficult to control those sorts of market forces."

He said those already in the market, particularly at entry level, would have to pinch their standard of living to compensate for the rake hike.

Mr Raimondo said renters should also brace themselves for rent rises.

Article from: www.reiv.com.au