End of hous­ing boom

Townsville Bulletin - - NEWS -

PROP­ERTY has been on an in­cred­i­ble run in this coun­try in the past decade but we’re ready to go out on a limb and call time.

That doesn’t mean panic. And it doesn’t mean prop­erty is a bub­ble that’s about to pop.

We just be­lieve the days of break­neck growth in prop­erty prices are com­ing to an end . . . as we’ve seen in Perth, Bris­bane and Ade­laide, residential prop­erty prices can fall. Booms in Syd­ney and Mel­bourne are now run­ning out of steam.

If you’re a prop­erty owner, par­tic­u­larly in Syd­ney and Mel­bourne, we think it’s a good time to step back and eval­u­ate what you want from your prop­erty in the next 10 years.

Be­cause, if you want to change homes in that time, now could be the best op­por­tu­nity to sell. Here’s why. HIGHER BOR­ROW­ING COSTS The RBA has set the cash rate at a record low to stim­u­late eco­nomic growth, which means right now it’s as cheap as it’s ever been to bor­row money.

But while that in­creases de­mand and drives price growth, it won’t last for­ever.

The ma­jor­ity of econ­o­mists ex­pect in­ter­est rates to in­crease from next year and once they start ris­ing it’s any­one’s guess how long be­fore they re­turn to their longer- term av­er­age of about 5 per cent.

And that’s the of­fi­cial cash rate, which means bank loans up­wards of 7 per cent. This would very quickly soften de­mand for prop­erty and curb prices. TIGHTER LEND­ING STAN­DARDS While we don’t think there is a na­tion­wide prop­erty bub­ble, Syd­ney and Mel­bourne are def­i­nitely look­ing over­heated, with prices in­creas­ing by 16 per cent and 10 per cent re­spec­tively in the past 12 months, ac­cord­ing to the latest Core Logic RP Data fig­ures.

To put the brakes on the manic buy­ing we’re see­ing in Aus­tralia’s two largest cities, the Aus­tralian Pru­den­tial Reg­u­la­tion Au­thor­ity ( APRA) has de­manded banks tighten lend­ing stan­dards. In re­sponse, many banks have re­duced or re­moved in­ter­est rate dis­counts on in­vest­ment loans and clamped down on loan- to­val­u­a­tion ra­tios for in­vestors. This will have a flow- on ef­fect as it be­comes harder for prop­erty in­vestors to bor­row money. IN­CREASED HOUS­ING SUP­PLY Build­ing of new homes is at record lev­els, with ABS data show­ing $ 57.1 bil­lion of new homes ap­proved in the past year com­pared with $ 49.6 bil­lion the pre­vi­ous year.

This build­ing boom is pos­i­tive news for the econ­omy

but it’s also a sign house prices may start to ease. With so much new hous­ing on the mar­ket the im­bal­ance of sup­ply and de­mand that has driven prices will be rec­ti­fied and even re­versed. This could also have a soft­en­ing ef­fect on rents.

And if some­thing’s mak­ing less money, it’s worth less, so that means lower prop­erty prices too.

A SLOW­DOWN IN CHINA The re­cent tur­moil on China’s share­mar­ket has re­vived spec­u­la­tion about the state of its econ­omy.

With so much Chi­nese in­vest­ment money com­ing into our prop­erty mar­ket, a slow­down there would, again, take sig­nif­i­cant de­mand out of real es­tate.

And if the Chi­nese econ­omy does hit the skids, the flow- on ef­fects would im­pact our eco­nomic prospects too. WHEN you take all of these fac­tors into con­sid­er­a­tion, it’s clear a lot of forces are stack­ing up against prop­erty prices.

So if you’re lucky enough to own a prop­erty that has ap­pre­ci­ated dur­ing the re­cent boom and you in­tend chang­ing houses in the next cou­ple of years, now may be a good op­por­tu­nity to think about bring­ing those plans for­ward – sell at the peak and take your time find­ing a re­place­ment.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.