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Why everyone needs to take a chill pill - featured image
By Andrew Mirams

Why everyone needs to take a chill pill

You know the market has turned when you start seeing headlines with words like “bust”, “crunch” and “plunge”.Housing Market Change

It was only 18 months ago when the words “boom”, “record highs” and “peak” were much more common.

The thing is, there is no one market in Australia – not that most journos seem to understand that.

We have eight capital cities and hundreds of regional locations, which each have their own economies, and that means they have their own property markets, too.

Markets up and down

This market disparity is clearly evident when we look at the latest property statistics.

According to CoreLogic, over the year to June, dwelling prices in Sydney have fallen by 4.5 per cent and are up by one per cent in Melbourne.

In Brisbane and Adelaide, they’re up marginally, too, but that’s been the state of play for a while now.

In Darwin, prices have fallen 7.7 per cent in a year and in Perth they’re down about 2.1 per cent, too.

Meanwhile, in Hobart, dwelling prices have soared by 12.7 per cent in just 12 months.

So, how can there be one market to report on? Of course, there can’t be.

And that means that everyone needs to take a chill pill – especially when it comes to the Sydney market.


House prices in Syd ney increased by a whopping 75 per cent from 2012 to 2017 so a fall of five or even 10 per cent does not represent the sky falling.

It’s a common sign of a market transitioning from the peak to the slow-down parts of a market cycle.

Likewise, Melbourne’s market might not be posting great numbers, but that doesn’t mean that its market is in trouble.

Lending reality

One of the main reasons why our two biggest markets are flatlining, apart from the market cycle, is that lending remains constrained for some borrowers. Market Cooling

That said, new research has found that the current credit “crunch” is not as pronounced as it seems when you look at what’s happened before – because we have experienced such environments before.

According to CoreLogic research, compared to their historic monthly peaks, owner occupier (ex-refinance) commitments are -1.8 per cent lower than their peak in November 2017 and investor commitments are down -27.5 per cent from their peak in April 2015.

However, we’ve been down this road before. The value of lending to owner occupiers fell:

  • From April 1994 to April 1995 lending fell -29.4% (cash rate moved from 4.75% to 7.5%)
  • From February 2000 to October 2000 lending fell -25.9% (cash rate moved from 5.5% to 6.25%) Realty Market
  • From September 2003 to January 2004 lending fell -15.8% (cash rate moved from 5.0% to 5.25% while Sydney and Melbourne housing markets were starting to slow)
  • From June 2007 to August 2008 lending fell -31.0% (cash rate rose from 6.25% to 7.25%)
  • From September 2009 to March 2012 lending fell -27.9% (cash rate rose from 3.0% to 4.25%).

Looking at investors, the value of lending fell by the following percentages during the following periods, according to CoreLogic:

  • From January 2000 to October 2000 lending fell by -33.0% (cash rate moved from 5.0% to 6.25%)
  • From October 2003 to June 2004 lending fell by -27.3% (cash rate moved from 5.0% to 5.25% while Sydney and Melbourne housing markets were starting to slow)
  • From June 2007 to February 2009 lending fell by -32.2% (cash fell rose from 6.25% to 3.25% but not before rising to 7.25%)
  • From May 2010 to April 2011 lending fell by-16.8% (cash rate rose from 4.5% to 4.75%).

So, what does it all mean? risk investment market

Well it means that what was old is new again!

Some of our markets are in slowdown, some in stablisation, some are heading towards an upswing, and some – like Hobart – are no doubt nearly their peak.

Plus, there are early signs that we are closer to the end than we are to the beginning of the tougher lending environment.

Then, before you know it, the headlines will start featuring words like “boom” again – even though we know it’s just the normal mechanisms of a market cycle.

Getting the right financial advice about market conditions

Across the country, markets are moving in different directions for different reasons.

And that means opportunities for savvy buyers and investors – as long as they ignore some of the alarmist headlines!

The world of banking and finance can be a pretty daunting one for both novice and sophisticated investors and since our establishment in 2002 we've focused on providing outstanding service and business standards.

About Andrew Mirams Andrew is a leading finance specialist who holds a Diploma of Financial Planning (Financial Services). With over 32 years of experience in finance, Andrew has been acknowledged by the mortgage industry with multiple awards. Visit IntuitiveFinance.Com.Au
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