Real estate and training guru Daniel Spencer recently addressed concerns about rising interest rates at OpenLot's Industry Training Night. Spencer urged agents to shift their mindset and understand that increasing interest rates can have positive implications for the industry. He emphasised the need for salespeople to adapt their thinking and engage in constructive conversations about interest rates. Spencer's insights shed light on how this development can actually benefit prospective buyers in the real estate market.
Spencer contextualised the current interest rate increase by highlighting the extraordinary circumstances that led to historically low rates during the pandemic. He explained that as the global economy gradually recovers, interest rates are expected to return to normal lending values, which historically range from 6% to 7%. Contrary to popular belief, Spencer argued that this shift is advantageous, as it contributes to more affordable housing prices. He provided examples of properties that sold for lower prices despite having higher interest rates compared to a year ago.
Spencer drew on historical data and shared anecdotes from previous periods of interest rate increases. He pointed out that Melbourne experienced a booming real estate market from 2012 to 2014 when interest rates were as high as 6.5% to 9.5%. This evidence suggested that increasing interest rates do not automatically hinder property price growth. Spencer explained that while rising interest rates initially lead to a decline in property prices, stability returns once interest rates stabilise.
Spencer predicted a rebound in the real estate market as interest rates begin to stabilise. He anticipates that buyers would regain confidence, particularly after the December period when interest rates historically do not rise. Spencer emphasised the importance of shifting the conversation with buyers from purchase price to monthly repayments. By understanding the impact of interest rates on their budgets, buyers can make more informed decisions. He cited recent auctions as evidence of market improvement and agents becoming more adept at navigating the changing landscape.
In conclusion, Spencer highlighted the following:
- Government's and the Reserve Bank of Australia's vested interest in maintaining a stable real estate market.
- Historically, falling markets in Australia have experienced declines lasting between nine and 14 months before rebounding. With Melbourne currently in its 12th month of a downward trend, Spencer suggested that a market correction is imminent.
- The rise in interest rates is a necessary adjustment that prevents excessive price growth and ensures the long-term affordability of real estate in Australia.
By providing valuable insights and historical context, Daniel Spencer's analysis aims to ease concerns about rising interest rates and encourages a positive outlook for the real estate market.
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