Problem is the Shortage of Land, Not Rates

Rising interest rates will not end the desire to buy property in an undersupplied housing market, real estate agents say.

A lack of housing meant people were buying properties quickly and the
0.25 percentage point increase in rates yesterday would have little impact on the decisions of those in the market for something new. But some home buyers might feel the squeeze.

The rate rise will not burst the property bubble in Sydney, according to the president of the Real Estate Institute of NSW, Wayne Stewart.

''The marketplace is driven by supply and demand. It's not driven by interest rates,'' he said.

''The greatest problem that we're facing is the shortage of property.
It's an absolute social crisis.'' He said it would certainly overshadow the interest rate rise.

''The most inflationary thing is the shortage of properties and the demand for homes at every level is far outstripping the supply. That's underpinned by the fact that we're not releasing enough land [and] that's pushing the prices up when people feel they have to get into the market.''

But Mr Stewart said the rise might cause mortgage stress for people who already had big mortgages. ''We're going to see this as the sad fact of mortgages coming up. There are people where any increase puts them on the breadline,'' he said.

''We will see a rise in mortgage stress sales but what we urge people to do is to think about the interest rate rises that have been promised for the last few months.

''This is a time when commonsense should prevail over egos in the marketplace and when you're planning for the future, you need to look at affordability.''

Urban Taskforce Australia, which represents developers and financiers, said that while rate rises might reduce some of the housing demand, the main problem of supply remained.

''Each interest rate rise is tantamount to a game of Russian roulette with Australia's housing supply,'' the chief executive, Aaron Gadiel, said in a statement.

He said interest rates should not be used to attack housing demand when the problem was a shortage of housing.

''The Reserve Bank has been using increased interest rates as a weapon against home price inflation,'' Mr Gadiel said.

Latest NewsProblem is the Shortage of Land, Not RatesMonday, 02 January 2017

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