Reading Navigation
- Foreword
- House prices will be hit by a new wave
- Where will the Australian property market go in the future?
Preface
Just this afternoon! Australia’s new round of interest rate hike and is almost a certainty!
Australia Institute economist Richard Denniss predicts official interest rates will rise by 0.25% to 0.4%. Some economists believe that the Reserve Bank of Australia may raise interest rates by 0.5% to 0.85%. For a 30-year loan of A$1 million, if the RBA increases interest rates by 0.25%, the monthly payment will increase by A$131. If the interest rate is increased by 0.5%, the monthly payment will increase by AU$265.
Denniss warned: "The Reserve Bank of Australia has sent a signal that interest rates will continue to rise in the next 6 to 12 months, which means that the maximum monthly payment will increase by thousands of Australian dollars."
Denniss said that the Reserve Bank of Australia has previously stated that before wages start to rise, Won't hike it, but apparently it's not possible . Now, interest rates have gone up, but wages have not.
The first round of interest rate hikes has had a significant impact on Australian housing prices. It seems that the second round of interest rate hikes will be even more fierce. Where will the Australian housing market go from tomorrow?
House prices will surely be hit by a new wave
CoreLogic data shows that one week after the interest rate hike, Sydney’s house auction clearance rate dropped 3.6 percentage points to 58.7%, the lowest level in two years. Melbourne fell 3.8 percentage points to 64.6%, the lowest point so far this year.
The decline in auction clearance rates indicates that house prices are about to fall. This situation is especially obvious in Sydney and Melbourne. Many buyers have either withdrawn from the market or taken a wait-and-see approach.
The latest data shows that in May, Sydney house prices fell by 1% and Melbourne house prices fell by 0.7%. Brisbane and Adelaide house price growth also shrank to 0.8% and 1.8%.
Soon, a new round of interest rate hikes is coming. Will house prices collapse?
What is certain is that in the next six months to one year, housing prices may fall by several or even more than ten percentage points, but to talk about a collapse is probably a bit unfounded.
Interest rate is a double-edged sword. Since someone is injured, someone will benefit.
The injured people are actually net debtors (net borrowers), which refers to individuals or families whose total debt is greater than their total deposits. For example, a family with only a deposit of AUD 20,000 but a debt of AUD 200,000, then regardless of other conditions, In this case, the family's net debt is $180,000.
In the same way, when interest rates rise, although the loan costs of net deposit households also rise, the cash flow obtained by such households through investments such as time deposits or treasury bonds will rise significantly, easily hedging loan costs, so Naturally, he became the winner.
In addition, several trends in the market also show that Australian housing prices have not been forced to a dead end.
First of all, currently, the housing vacancy rate in all Australian capital cities has dropped to historical lows. Coupled with the sharp decline in new home approvals, which has led to a reduction in the supply of new homes, this shows that the Australian housing market is still in a state of extreme shortage.
Secondly, Australia has fully opened up and immigrants are returning.
In addition, I believe that in the future Labor Party 's "Help to Buy a House Plan" will definitely increase the demand for housing.
Where will the Australian property market go in the future?
As we said in the previous part, with the full opening of Australia’s borders, and the amazing resilience of Australia’s economy and residents’ quality of life under the epidemic, the appeal of Australia, an immigrant paradise, has become even stronger, and the number of immigrants has increased. The increase will undoubtedly drive up real estate prices.
Let’s take a look at a very critical data - the scale of Australian residential real estate is as high as 10 trillion Australian dollars. According to the predictions of some mainstream institutions, the RBA interest rate hike will cause housing prices to fall by 15%, which is equivalent to the Australian housing market will evaporate. 1.5 trillion Australian dollars !
You must know that real estate, such as real estate, is often used for mortgage. The number of loans that can be obtained through mortgage for a house worth 1 million Australian dollars must be higher than that of a house worth 850,000 Australian dollars (house prices have fallen by 15%) .
In other words, the decline in real estate prices will also trigger the butterfly effect , expanding its destructive power step by step in an interconnected economy.
Therefore, from the perspective of economic policymakers, house prices can fall slightly, but they cannot fall easily.
In addition, the RBA still has plenty of room to maneuver on the pace and intensity of interest rate hikes - it can pause the rate hike if something goes wrong.
Therefore, short-term fluctuations in housing prices may be the price behavior of some cautious investors, but ensuring the long-term stability of housing prices is the top priority of the Australian government.
Moreover, when people gradually adapt to the interest rate hike cycle, housing prices will surely return to the upward trend.
Conclusion
So, is now a good time to enter the market?
Everyone needs to make a judgment based on their own needs, but in general, the feverish period of the housing market has passed. What you are facing when entering the market now is an increase in the number of houses for sale and a decrease in competition, which means buying at a more rational price. Opportunities for desirable homes are increasing.
