Labassa Perspective | Higher Rates, Greater Selectivity

The RBA has increased the cash rate by 25 basis points to 4.85%, against a backdrop of persistent inflation and tighter financial conditions.

For Australian real estate, higher rates bring both pressure and opportunity.

Higher financing costs place greater scrutiny on valuations, leverage and project feasibility. At the same time, tighter capital conditions can create a more selective investment environment.

For investors, we believe this reinforces the importance of:

• Disciplined underwriting

• Appropriate leverage

• Strong asset fundamentals

• Robust downside protection

• Returns that appropriately compensate for risk

Whether investing through real estate debt or equity, the focus should not simply be on where rates move next, but on whether an investment is appropriately structured for the environment in which it operates.

Higher rates raise the hurdle. We believe that makes investment discipline more important, not less.