Chris Bedingfield, a principal and portfolio manager at Quay Global Investors, says property investors shouldn’t be overly concerned about potential interest rate moves, noting that “global property is not as sensitive to interest rate moves as many people believe”.
“While interest rates do affect the performance of global real estate investment trusts over the short term, over the longer term the impact is negligible,” Mr Bedingfield said.
He pointed to the last time interest rates in the US and Australia were tightened, noting that global real estate is a “particularly strong performer” during this time.
CoreLogic head of research Cameron Kusher, agreed with Mr Bedingfield that the impact rising rates will have on investors will be minimal in the long term.
“Yes, interest rates will have an impact, but you get a lot of these questions like, ‘If interest rates went up 2 per cent, would you be able to repay your mortgage?’ and people say no, but people kind of forget that if interest rates are moving that much, there’s also going to be an improvement household incomes and factors like this,” Mr Kusher said.
“I think initially when they start climbing it does have an impact, but longer term I think the impact will be negligible.”
Mr Kusher said investors using interest-only mortgages and investors who are new to the property market would be the most affected by higher rates.
“A lot of investors utilise interest-only mortgages, so yes they get the benefits of negative gearing at the end of the year, but they have to carry a higher cost or higher monthly repayment throughout the year,” he said.
“The other thing is that we’ve seen investor activity hit record high levels over recent years, so a lot of investors that probably hadn’t invested in property in the past have come in at a time when interest rates at record lows could create challenges if they push a bit higher.”