According to John McGrath, Chief Executive Officer of McGrath Estate Agents, buyers who missed out last year should take advantage of the market taking a breather within the next 12 months.
The current downturn is one of the faster-correcting markets I’ve seen in my 40 years in real estate.
New figures released by CoreLogic last week show “the rate of decline is comparable with the onset of the global financial crisis in 2008, and the sharp downswing of the early 1980s”.
If you missed the numbers, here they are.
How house prices changed in July
Source: Hedonic Home Value Index, CoreLogic, published August 1, 2022
I think the current market drop reflects borrowing rates.
Rates will increase to around 5.5%. If rates go much higher, the market will be hit harder as a result.
Historically, Australians have paid an average of around 7% for mortgage interest rates so it’s not as much the real level of current rates but the rapid increase from where we were six months ago.
Interest rates are rising because inflation is rising. The latest annual inflation number is 6.1%. That’s the highest it’s been for more than 20 years (since the introduction of the GST).
So far, the property market has reacted in a number of ways:
I think we’ve already seen the majority of the price reductions due this cycle but it may get a little worse before it plateaus, perhaps another 3-5%.
Overall, buyers have received a large and immediate discount from the recent peak. So while I don’t see a huge rush for buyers to jump in before prices rebound, the window of opportunity won’t last forever.
Buyers who missed out last year should take advantage of the market taking a breather within the next 12 months.
The ASX 200 rallied 5.75% in July after an 11.75% decline over the first six months of the year. Share markets are inherently forward-looking, so investor sentiment tends to be ahead of real economic changes. So, the improvement in July is quite interesting.
The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters.
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