Well, no need to run for cover just yet as I certainly don’t think the sky is falling in however there are without doubt some concerning fundamentals at play in the coming 18 months.
Reading the property section of the newspapers of late would make even the most optimistic or pessimistic of property pundits scratch their collective heads! Rates will rise, rates will stay the same, we are oversupplied, we are undersupplied, building approvals tumble, big developers renege on previously agreed deal…… please someone tell us what is truly going on?? The weekend AFR, most savyy investors “go to” publication had 3 articles all telling a differing tale and all had a strong and believable underlying basis.
It seems to be crystal clear that no one really knows (does anyone ever) but there are number of factors that could come to bear.
It seems inevitable that rates can’t stay the same forever and dependant on when the RBA commences what is viewed to be a series of small and careful increases will dictate how much mortgage stress might or might not be felt across the market. Those that have bought in the past 12 months (widely perceived as the top of the market) and have stretched themselves financially to get into the market will certainly feel the pinch if rates are to rise 1 to 1.5% in the short term. Their best friend right now is a lower than expected inflation rate.
The tightening of lending criteria to investors will almost certainly dampen enthusiasm and see the percentage fall from the current 40% reported at the end of 2017. Settlements in off the plan apartments are also becoming more difficult with valuations often coming in 10-15% below purchase price, with buyers having to stump up the difference in cash.
The positives are of course being the forecast undersupply and ongoing population growth. These two factors alone should see that any fall in prices are relatively soft however it would be a brave person that predicts strong price growth in the short to medium term…….
Already the number of properties coming to market to go to auction are well below those levels of 2017, this shortage if it continues will also help to keep things steady.
Whichever way it goes, hold on to your hats, its going to be a very, very interesting ride……….
