The kids are now at school and we can focus on the key question – what will happen to the property market in 2016?
We have all seen the headlines of China being in free-fall. And there is even talk of recession in Australia! But, overall, property is likely to hold up.
In the banks’ eyes there are now two classes of borrowers; owner-occupiers and investors. Owner-occupiers are really in the box seat, with some lenders offering as much as $2,000 just to take out a loan with them. More importantly, banks are still dropping interest rates for owner occupiers.
Investors really are the poor-cousins in the banks’ eyes. Prompted by government pressure, interest rates on investment loans are now much higher and the banks are coming choosier as to whom they will lend.
Because part of the population is finding it harder to get a loan, demand will be constrained such that there is more of a balance between buyers and sellers.
And, while it is harder to get an investment loan, it means that potential first-time buyers can return to a market that now has fewer competitors.
But what if prices collapse? I hear you ask. This is very, very unlikely. Price collapses are normally preceded by some ‘shock’ to the system; unemployment or a rate rise.
Here, if anything, the situation is getting better. The Bureau of Statistics recently produced data showing that employment is improving and, if there is to be a change, interest rates are likely to drop this year.
One area that will likely see growth this year is commercial lending. The banks are falling over each other to lend to businesses. Commercial property has a yield of about five percent, whereas residential property is about three-and-a-half. Maybe, for investors, this is the way to go?