Sydney, Aug 14, 2007 AEST (ABN Newswire) - The latest interest rate rise and predictions of further rises this year will hit the property market and leave some developers struggling, says Hall Chadwick insolvency expert, Geoff McDonald.
"With property prices already under some pressure in a relatively soft market, these rises will add more stress to developers and their second tier financiers, leading to a further softening in the investment market," McDonald says.
With predictions of a further rate rise later this year, subject to consumer behaviour, the property market is likely to suffer further - with properties handed back and less investment in new developments.
McDonald says, "Consumers should be consolidating their household spending or reigning in their discretionary spending in preparation for another likely rate rise. The consequences for many consumers with little room to move on large mortgages could be dire."
The key difference between this rate rise and previous rises is the current poor state of the stock market and the relatively high levels of rent.
"To describe the share market as uncertain is being kind," McDonald says. "People don't realise that the rate of return on the All Ordinaries Index in the last 6 months (from 15/02/07 at 5969.10 to 14/08/07) is Nil. But that could mean investors divert their resources into residential housing, which could offset the softening effect of the rate rise to some degree."
McDonald says property developers needed to look hard at their businesses to avoid insolvency or make those tough decisions now.
Contact:
Jennifer YoonHall Chadwick Marketing CommunicationsPhone : +61 2 9263 2696Fax : +61 2 9263 2800Address: Level 29 St Martins Tower, 31 Market Street, Sydney NSW 2000
Social Media
Share this Article
