Saturday, March 27, 2010
Taking a hit or two from Mr Stevens...or is it?
While it's old news that Glen has upped the anti once again for us investors with a 25 point interest rate rise, it won't be long before once again our heart breaks just a little bit more with news that our holding costs are going to go up again. It's interesting though, because either way, we win. If the rates do go up, it means the economy is going well and it justifies the rent rises that are looming for my poor tenants. If the rates stay low, it's easier to hold. It's win win and I LOVE IT! In fact, I want to give Glen a big hug, rub that shinny head and give him a kiss on the cheek, followed by getting taken away by security, because men kissing men is just not on in today's society. Or is it..???
Anyway, it appears that Glen has created a situation where we are all educated about why the bloody rates actually do go up and down. (I'll give you my simple explanation) We all know inflation is a bitch, so raising rates is good to counter that, and we know that lowering rates is a great way of boosting the economy if people decide to buy TEAC and Great Wall, instead of Panasonic and Audi. The RBA have to balance this situation.
Fortunately for us, as I mentioned before, we investors win win because people know house prices go up if rates go up, and hence renters know rent goes up as rates go up....in fact, let's just say as the RBA lifts rates, everything goes up, except inflation!!! Win for everyone. Except for renters.
If rates go down, we win because our cash flow gets a reprieve and renters "think" they have won because their rent isn't raised. But we all know they're losing. Sorry, renters are taking a bit of a battering in this post.