Property investor predicts massive recession if interest rate rise was to take place

A Sydney property investor who owns more than 200 properties believes the Reserve Bank will never be in a position to increase interest rates because of one reason.

B Invested founder Nathan Birch believes the RBA is in a position where interest rates can’t increase.

The prolonged period of low interest rates could be around for much longer than first thought, with one Sydney property investor saying the Reserve Bank of Australia will not be in a position to increase them again.

B Invested buyer’s agency founder Nathan Birch, who has more than 200 properties in his own portfolio, believes the RBA is unable to raise interest rates because it cannot afford to let the property market collapse.

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With the last increase to official cash rates a decade ago, Mr Birch said the reserve bank has dug themselves into a hole.

“If they let the property market crash then we will have the biggest economic collapse this country has seen,” he said.

Interest rates are currently at an lowest.

“A one per cent hike to the official cash rate would see the economy die and half the people would loose their homes because they have borrowed too much and can’t afford the repayments.”

The most recent rate cut, in November, was also the first time the RBA has not moved by 0.25 per cent; instead cutting the figure by 0.15 per cent, or 15 basis points, to sit at just 0.1 per cent.

The property investor who owns about $80m in property across Australia said each time the RBA had cut interest rates, house prices rose as a result.

“You can tell when property prices have increased just by looking at what the RBA does with the cash rate drops,” he said.

“They manipulated the cash rate so much that we are at the point where there is no where to go.”

Rate are unlikely to increase for some time.

Archistar chief economist Dr Andrew Wilson said the prospects of an interest rate hike was nil for the foreseeable future until unemployment levels fall and there is substantial wage growth.

“Low interest rates were always going to happen, COVID-19 just accelerated the timeline,” he said.

“The cuts in interest rates has bought Australia in line with the rest of the world, which has seen low interest rates for a number of years.”

Mr Wilson added the reason Australia has been late to see record low interest rates was because of the mining boom following the GFC.

“The problem with the RBA is that there is no prospect of a higher rates and they’ve cut rates to almost zero,” he said.

“This gives them very few options to kickstart the economy other than good policy.”

The RBA is due to meet next Tuesday to discuss whether to hold or drop interest rates.

Originally published as Property investor predicts massive recession if interest rate rise was to take place