Hang in there Krisbarry.
I am renting an older style 2 bedroom house in a quiet street in a good suburb (Oatley, Sydney) for $280 / week. My partner keeps it very clean and it has a great backyard for the kids, dog, cat and now chickens to run around. The kitchen is on the small side, but that is fine as I prefer to outsource a lot of the cooking (LOL).
When we moved in (beginning 2003), I asked the R/E agent how much it would be to buy. He replied that with the size of the block and location, about $680,000.
You see the annomoly?
For the sake of argument, lets say the house is really worth $580,000, and we could have the rate increased to $300 p/w. The return on investment is only 2.7% (ignoring council rates). Hardly inspiring if further capital gains are uncertain as they are now.
Now the real rub. Everyone is focussing on interest rates with regards to house prices. But there is another even more important factor - unemployment rates.
We are currently sitting on record low (for recent times) unemployment rates. It is widely accepted that we are somewhere near the peak of our economic cycle, and we could expect unemployment to start increasing - especially if housing construction comes of the boil.
You now see whats wrong? For us electrical engineers, it is a classic (unstable) positive feedback oscillator.
A lot of the capacity constraint that the reserve bank is worried about has come from construction in this housing boom. But now the bank is increasing interest rates to over come this supply problem. When the scales tip, they COULD tip quite rapidly with devastating consequences for the economy.
And if unemployment rises 3-4% over the next few years, the banks and house prices are rooted.
I don't think interest rates will go up on wednesday.
Also I can only speak from my experience in Sydney. If I desperately wanted to buy a house now, I might look at Perth.
Also, I liked this quote from ABC business program on sunday.
"The meek shall inherit the earth, but not its mineral rights"