And so the property collapse begins! Or does it?
Just like everyone expected the All Blacks would keep winning-and-winning, and nobody ever expected James Bond to die in the last 007 movie, sometimes things don’t pan out as we expect.
If you are expecting a collapse in the property market – don’t hold your breath.
Most economists are predicting double-digit falls in property prices – and these seem accurate.
With the Reserve Bank determined to stamp out inflation, its clear that mortgage holders are in for some pain.
But many astute investors are starting to eye the property market as a golden opportunity, especially as unit rents in Melbourne soared 12.9 per cent during the 12 months to August 31, while Sydney unit rents rose 11.6 per cent in the same period, figures from Corelogic show.
The long-term fundamentals for the Australian property market remain very strong; in fact over the past 30 years, our strongest capital city (Melbourne) has increased in value by 459 per cent and our weakest (Perth) has still managed to increase by 303 per cent.
And with unemployment at a record low of 3.4 per cent, plus the permanent Migration Program ceiling increasing to 195,000 new entrants in 2022-23, the fundamentals remain sound for the property market.
Sure, the rapid interest rate rises we are seeing are putting borrowers through a whole lot of pain – but most of us can manage the increased payments.
Over the past years the banks have stress-tested loan applications, assessing whether loan applicants had the income to cope if rates rose by two or three per cent – this prudent approach is bearing fruit.
The banks are still hungry to lend to new customers; one bank will give you 300, 000 Qantas Points for taking out a loan with them, while Virgin will give you $2,500 and AMP as much as $5,000
Certainly property values will drop. But with CBA predicting interest rates will start to drop at the end of 2023, if you sit on the sidelines, you may miss out.
Graeme Salt is a leader of The Futurus Group, whose main brands comprise Origin Finance, Chan & Naylor Finance as well as Walker & Miller Training. For a no-obligations consultation on your home loan needs, please contact him on 1300 30 67 67