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[Facts & Myths] ...interest rates could shoot up and destroy the property market

The biggest danger to creating wealth is misinformation.

The reality is that many Australians are still fearful of entering the market. Actually I don't blame them! They get advice from well-meaning family, friends and workmates. And they follow the latest sensationalist articles in newspapers and on TV.

And, one of the biggest problems is that people are not getting advice from successful investors.

That's why I wanted to dispel some common myths about investing in property so that people can make sensible decisions based on solid information, not myths and fear-mongering. I often hear people voice their fears on interest rates so I’m very keen to discuss the topic of interest rates and how they affect the property market.

MYTH: Interest rates could shoot up and destroy the property market.

FACT: Interest rates and property prices do not co-exist in a world of their own. Although they both affect each other, they are also influenced by many other external sources including inflation, income levels, the employment rate and consumer confidence.

It’s important to understand that interest rates are used by the Reserve Bank of Australia as a mechanism to either stimulate the economy or slow down a run-away economy.

Now think of the following analogy …

Economics are a bit like a rubix cube.

You change one side and it affects the other sides.

People are currently a bit down on rental returns because they have only recently come down from a high.

That’s one side of the cube.

On the other side, interest rates for investment properties are currently sitting at an all-time low. This means the cost of ownership has dramatically reduced and money has never been cheaper to borrow. 

Opposite sides of the same cube.

It’s fair to say that the overall economy at the moment is a bit sluggish which is why interest rates for investment properties are low.

If the economy starts firing up and jobs, wages and consumer confidence increases then interest rates will rise.

Property ownership from a cost point of view will also increase, but so will inflation and wages, causing median house prices to rise.

Do you see the bigger picture?

So what you really need to consider is whether you want to purchase in the sales, or at the peak when things are most expensive.

Another analogy I often use is would you rather purchase an item in the boxing day sales when prices are at their lowest, or a month later, when the cycle has changed and prices are back up to their usual high?

If you buy when there is value in the market and prepare for growth, then you will position yourself to benefit in the long-run.

Don’t waste time procrastinating and wondering what could have been just because you are worried about interest rates affecting investment property prices.

Jump on board now and prepare for the next big wave, start saving your money and remember you should be in it for the long haul.

If you don’t believe me then take some advice from the legend of investment Warren Buffett… “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes”.

Property is a long-term investment and if you are willing to wait, then you can reap some massive rewards.

If you need help debunking any other myths, or just want some more information on interest rates for investment properties, click here or give us a call on 08 9200 7200 and book in to visit or skype with one of our Property Investment Specialists. They will show you exactly what is going on in the market at the moment and how you can profit from it.

This service is completely free of charge, comes with no obligations and could help you look at property in a fresh, new way.

Also don’t forget to check out some of our other resources … a great one to start with is the fundamentals of property investment.