A young property tycoon from Sydney's Mount Druitt suburb, Eddie Dilleen, who owns 81 properties worth approximately $50 million, has claimed that rising interest rates should not deter homebuyers from investing. Despite the 13th interest rate hike in the last 18 months by the Reserve Bank of Australia, Dilleen believes that property investment remains a viable option.
Dilleen, who has reduced his property purchases this year after buying 27 properties in 2022, has not reduced his spending. In fact, he has spent more this year than ever before, making two significant purchases within a span of 60 days, totaling $13 million.
According to Dilleen, the key to successful property investment lies in ensuring a good rental yield, ideally around seven percent or higher. He also advises buyers to purchase properties below market and bank valuations and to focus on metropolitan areas. Additionally, Dilleen suggests identifying when prices for metropolitan properties plateau, as it may indicate a future price boom. Lastly, he recommends looking for properties with higher intrinsic value than the asking price.
Dilleen's belief is that regardless of interest rates, investing in a property with a high rental yield will offset any rate increases. He argues that if the rental yield is, for example, eight percent and the interest rate is seven percent, investors would still gain a one percent advantage. This advantage could potentially cover additional expenses such as council rates and water rates.
While Dilleen's advice primarily caters to investors, he urges prospective homebuyers not to stretch their borrowing capacities to the limit. He advises them to consider properties below their maximum borrowing capacity and to leave room for unexpected expenses.
Amidst concerns about future interest rate hikes in Australia, Dilleen encourages individuals to invest as soon as possible. He predicts that in the long term, property values will continue to rise, making investments profitable.
The Reserve Bank of Australia's recent interest rate hike on November 7, which brought the cash rate to a 12-year high of 4.35 percent, has raised concerns among homeowners. If interest rates reach five percent, the average Australian borrower could see an increase of over $400 in their monthly mortgage repayments.
According to experts, inflation may not return to the targeted range until late 2025, which could potentially result in further interest rate increases. However, even with a cash rate of 5.1 percent, Australia would still have lower rates compared to countries such as New Zealand and the United States.
Despite rising interest rates, Eddie Dilleen's success in the property market serves as a testament to his belief that investing in high-yield properties can outweigh the impact of rate hikes. His advice provides potential buyers with a valuable perspective on navigating the current market conditions.