Have their property markets really bottomed?
Well, that's a brave call made by my guest today, Stuart Weymss.
If you think about it, this time last year, the property market was running full steam ahead, consumer confidence was high, and you could still get a fixed mortgage rate with a 2 in front of it.
What a difference a year makes.
The Reserve Bank of Australia began lifting the cash rate in May in response to rising inflation and hasn't stopped since - enacting the fastest series of rate hikes since the 1990s and sparking a dramatic turnaround in property values.
As the property market edges toward the end of 2022, prices have fallen by around 7% overall, but by more than 10 per cent in selected areas; fixed-rate mortgages start from 5 per cent and buyers can afford to borrow far less than they could a year ago.
So how much further are our property markets going to fall?
There are many large and powerful institutions that have a vested interest in rising property prices.
But all levels of government (i.e., federal, state, and local) probably have the most to gain.
This leads to two important observations.
Firstly, the government is the main contributor to housing affordability pressures i.e., making housing less affordable.
Secondly, government tax revenues are dependent upon rising prices and demand for property
- Metrics – can’t rely on just one
- Asking prices are flat or rising
- Auction clearance rates held up well through Spring and into December
- Vendor metrics firm – days on market and discounting
- Most borrowers have factored in higher interest rates.
- The top of the rate cycle is close
- The RBA knows there is a lag
- Top of interest rate cycle close
- Our strong population growth will underpin rental and capital growth
- Yields are increasing
- Very low supply/demand imbalance and no significant new supply until prices rise and developments are more financially feasible
- The big headwind – fixed-rate mortgages converting to higher variable rates
Links and Resources
Stuart’s Book – Rules of the Lending Game & Investopoly
Some of our favourite quotes from the show:
“The state governments are particularly dependent on stamp duty.” – Michael Yardney
“I think it’s also probably worth remembering that we’re starting this year with very strong fundamentals.” – Michael Yardney
“I don’t think you’re suggesting we should be investing for cash flow, but the cash flow’s going to support the properties that give us capital growth.” – Michael Yardney
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