Following the release of housing affordability figures yesterday, the Housing Industry Association spokesperson Chris Lamont commented, “If you were to see interest rates increase by one or two per cent you’d see pandemonium across the market.”
This is quite ironic, as earlier in the year the HIA was endorsing a 20% rise in rents, a figure some 5 to 6 times more than inflation. The ABS Guide to the consumer price index: 15th Series 2005 shows rents represent a significant 5.22% weighting in the CPI, meaning if rents were to rise at such a fast pace, it could put quite a bit of pressure on inflation which would lead to subsequent rate rises.
It would appear the HIA is only interested in anything good for it’s members. Rising rents could encourage more investors into the market, yet if rates rent up new house construction and turnover in existing properties could slow.
Chris Lamont went on to say, “There really would be a feeding frenzy in terms of investors trying to snap up property, but more importantly households simply going to the wall.”
Which is an interesting comment based on previous history. Alan Kohler showed this graph on this nightly market report a while back showing that following the May rate rise, investors fled the market, yet this time a rate rise would cause a frenzy.
» Rate rises to send households ‘to the wall’ – The ABC, 30th May 2007