With market speculation rife that the Reserve Bank of Australia (RBA) may lower interest rates later in 2024, you might be contemplating whether to buy now or hold off in anticipation of more favourable lending conditions.
After all, lower interest rates can significantly reduce your loan repayments, making property investment more affordable in the short term.
Moreover, the less you pay in interest, the more profit you can retain from your rental income – improving your cashflow in the process.
But here’s the catch.
While you’re waiting, property prices might be creeping up, meaning by the time you’re ready to buy, your entry price has significantly increased and the savings from those lower interest rates don’t quite stack up anymore.
Moreover, the timing of interest rate cuts is itself unpredictable. Economic factors, both domestic and international, influence the RBA’s decisions. Predicting these movements accurately is challenging, even for experts. As such, there’s a chance interest rates could remain high for longer than the market anticipates.
This uncertainty adds a layer of risk to the decision to wait, as you might miss out on a favourable buying opportunity in the hope of a rate cut that may not materialise as expected.
What’s an investor to do?
So should you wait on the sidelines or dive in?
Well, rather than trying to time the market based on rate predictions, think about the big picture.
This tells us that property investment is a long-term game, with national home values growing 382% over the 30 years to July 2022, according to CoreLogic.
Over those 30 years, there were six distinct upswings, six distinct downswings and innumerable RBA cash rate decisions.
So if you find a property that meets your investment criteria and fits within your budget, it might be better to act rather than wait for a potential rate cut that will not significantly impact the long-term value of your investment.