Rate rise may boost commercial property in Aus

ANGELA HARPER
October 7, 2009

The latest interest rate rise spells tough times for those battling mortgage stress but could be a boon for commercial property investment.

On Tuesday the Reserve Bank of Australia (RBA) increased interest rates by 25 basis points to 3.25 per cent.

Queensland Premier Anna Bligh said the interest rate rise was an encouraging sign of economic optimism but was a blow for homeowners struggling to meet repayments.

"For those feeling mortgage stress any interest rate rise is tough news," she told reporters on Wednesday.

"What Queensland property market needs is some restoration of confidence in investors in large scale commercial projects."

Large scale retail, office buildings and some major high-rise projects had suffered from lack of investor confidence during the downturn.

Queensland treasurer Andrew Fraser said the RBA's increase signalled that it was official - economic recovery is underway.

"The three per cent cash rate, the lowest ever, was described for a long time by the (RBA) governor as an emergency setting," Mr Fraser told parliament.

"Moving from this setting was inevitable.

"History will be the judge of whether it has the timing right."

Ray White real estate property group chairman Brian White said a small rise in official rates shouldn't hurt the housing market.

Consumers' confidence had flowed through to the recovering housing market after Australia's economy held up under the strain of the global financial crisis.

"This 0.25 per cent rate rise was expected, it was just a matter of when and people will anticipate rates will return to more traditional levels," he said.

"I think we can afford a couple of interest rate rises and the confidence in the economy and the real estate market will override any concerns about where rates are headed."