Finding Opportunity in a Shifting Interest Rate Landscape

Hi, Andrew Bell here.

The intense speculation about interest rates we saw a month or so ago seems to have subsided. Interestingly, many modern economies—such as Switzerland, Sweden, Canada, Europe, and now the UK—have cut their policy rates. This makes it harder for the Reserve Bank of Australia to consider raising rates. However, the Reserve Bank recently announced that we shouldn’t expect any rate cuts until mid-2025. As a result, we continue to experience the ripple effects of higher interest rates throughout the economy, including the real estate market.

It’s a good moment to reflect on a powerful concept from Warren Buffet, the world’s most famous and successful investor. His timeless advice to “be fearful when others are greedy, and be greedy when others are fearful” is incredibly relevant today. What Buffet means is that when markets—whether real estate, stocks, Bitcoin, or gold—are booming due to the exuberance of those chasing quick gains, it’s often the worst time to enter. There are no great deals to be found when buyers are paying whatever it takes just to participate. The best opportunities arise when others are cautious. When the market seems unappealing, competition is lower, and you can negotiate from a stronger position. Some would argue that the peak of the interest rate cycle presents just such an opportunity.

From my 50 years of experience, I can confirm that counter-cyclical buyers—those who go against the grain—always come out ahead. They buy when others hesitate, though they must hold on while the market cycles through its phases.

While some still speculate about one or two more interest rate hikes, the majority now believe rates will likely remain stable in the medium term. The Reserve Bank has suggested no significant adjustments—up or down—before mid-next year. This creates opportunities for buyers, but only for those willing to take a counter-cyclical approach. In my view, the best time to enter the real estate market is often when it feels like the worst time to do so.

This cycle may be different, however, due to the ongoing issue of limited property supply and demand far exceeding availability. While a major downturn in the real estate market seems unlikely, conditions over the next six months are likely to be more favorable for buyers than at any point in the last four years. That said, there probably won’t be any bargains to snatch up. It will require some courage, as media attention will likely focus on the negative aspects of the current high-interest rates.

We’ve certainly experienced a mild winter, and now we’re preparing to enter the spring season, which traditionally sees increased real estate activity. Many buyers aim to finalize purchases before year-end to settle into their new homes by Christmas, and for families with school-aged children, to prepare for the next school year. I suspect the market will remain busy, despite the challenges posed by the ongoing property shortage.

On a positive note, it’s encouraging to see investors returning to the market, with early signs of recovery in housing finance lending—a topic I’ll cover in an upcoming report.

There’s always plenty of information to share, and I look forward to keeping you updated on a fortnightly basis over the coming months.