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New data has revealed that the rising rate environment means cash flow for landlords is now more important than ever.
Speaking to REB, Managed App head of operations Rohith George revealed that back in 2019, just 45 per cent of investors were choosing instant payments as their preferred payment frequency through the Managed App.
In 2023, nearly nine in 10 investors are choosing this payment method — a whopping 87 per cent.
While he attributes some of this shift to the previous familiarity of monthly payments and ongoing education by real estate agents about the ability to pay out instantly, he believes that much of the change comes down to the RBA’s decision to push up the cash rate much earlier than anyone had previously anticipated.
From Mr George’s perspective, “with nine consecutive rate rises, cash flow to owners is more important than ever.”
“Owners can no longer afford for their rental income to sit in agency trusts anymore,” he flagged, ultimately earning no interest.
While traditional trust accounts pay net rental funds to owners either mid-month or at the end of the month, the head of operations indicated that investors “need their money paid into their mortgage offset accounts as soon as the rent is paid.”
With Managed App providing investors with the ability to receive rental income in seconds after the tenant has made their payment, Mr George said this is one way owners are able to offset the rising rate environment.
Mr George’s comments come ahead of the Reserve Bank of Australia’s (RBA) next decision on the cash rate, which will be announced a week from now, on Tuesday, 7 March.
At February’s RBA board meeting, the decision was made to lift the cash rate by 25 basis points to 3.35 per cent.
At the time, REB reported on the sentiment shared by a number of real estate industry heavyweights, including Raine & Horne chairman Angus Raine and Real Estate Institute of Australia (REIA) president Hayden Groves, that the RBA should stem cash rate hikes off the back of 2022’s eight consecutive rate hikes, the effects of which remain to be fully felt.
The RBA governor, Dr Philip Lowe, has since defended the bank’s tactics to “navigate the narrow path”, stating that they are not intent on “smashing Australia” into a recession, taking issue with the allegation by a member of the Senate Economic Committee.
At that committee meeting, Senator Nick McKim reminded Mr Lowe that he had admitted to “overdoing monetary stimulus during the pandemic” and that he had stated rents weren’t likely to be significantly impacted by interest rate increases.
Senator McKim then acknowledged that “rents are currently going up at the fastest rate on record.”
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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