Rate rise to impact WA property market - industry insiders

Property prices in WA will come under increased pressure as a result of today's interest rate increase, according to industry insiders.

Master Builders Association of Western Australia Gavan Forster said that the 0.25 per cent interest rate rise announced today would further dampen new buyer enthusiasm for home ownership.

"The Reserve Bank may have gone too far this time. A third successive rise in rates may lead to a situation of unnecessary overkill in the housing sector," he said.

Reduced affordability, lower borrowing power and adverse effects on consumer confidence were the most likely consequences of the interest rate hike, Mr Forster said.
"This interest rate increase is a further knock to those who can least afford it," he said.

Hegney Property Group chairman Gavin Hegney said Perth home owners were still in a strong financial position to sustain this recent increase because of above average levels of property growth that have resulted over the last 12 months .

"For those looking to refinance, they should do so promptly while house prices are still strong across the board," he said.

"The areas most at risk are the traditional first home buyers and the broader mortgage belt market who were most susceptible to interest rate increases given their traditional exposure to higher levels of debt.

"To refinance now whilst house price are high can assist families to adjust their cash flow using the recent increased equity in their property and help make calmer choices rather than panic based decisions resulting in property owners being forced to sell in times to come."

Real Estate Institute of Western Australia president Rob Druitt said the booming WA property market had been slowing down, probably as a result of the August interest rate rise.

The announcement today by the Reserve Bank of Australia that it was lifting the official rates by a quarter of a percentage point to 6.25 per cent - its third rate hike of the year - would mean the WA market would continue to slow down, he said.

"We had already started to see that turn in the market but this will speed the slow down in the property market," Mr Druitt said.

"It was time for our market to cool in any event ... it was not sustainable".

Mr Druitt said that for the September quarter, the number of grants to first home buyers had fallen by 8.2 per cent, while in the month of September, the number of loan approvals to first home buyers had fallen by 11per cent.

He said the rate rise was not needed and not good news for home buyers or home owners.

The first home buyer and the middle end of the market would feel the rates rise the most, while the top end of the market would be relatively unscathed, he said.

But he said the market would remain relatively robust as the WA economy was booming.

"There is still strong underlying demand," he said.

WA Shadow Treasurer Troy Buswell said the news placed more pressure on the State Government to provide Stamp Duty relief to first home buyers.

"People have every reason to ask how it is in Queensland that first homebuyers at the median house price will soon pay no stamp duty, yet in WA first homebuyers at the median house price are hit with an $18,200 stamp duty bill," he said.

"Perhaps $18.200 is not much money to Eric Ripper, Australia's highest taxing Treasurer, but to young Western Australians struggling to buy their first house it is a very substantial amount of money that can be put to better use than lining Eric Ripper's already bulging coffers."