There’s the doom and gloom headlines, but where is Australian property really heading? Adelaide mortgage broker Hayley Walsh explains.

The Australian property boom is well and truly over.

Rising interest rates have brought the runaway train to a grinding halt.

In Sydney and Melbourne, it even triggered the start of a correction which has seen prices gently ease amid falling clearance rates and dwindling interest.

It comes off the back of a bumper 2021 which saw prices balloon by a record 23.7% nationally and 24% in Adelaide.

Local prices continue to defy the trend in the eastern states and are continuing to rise although much more slowly than what we’ve seen.

So what does the future hold?

Are the doomsayers who are predicting a property crash on the money?

Scare tactics

From the moment interest rates began to rise, the noise coming out of the mainstream media was driving fear and trepidation.

The Reserve Bank of Australia has already lifted the cash rate from its record low of 0.1% to 1.35% in July with industry sources predicting that to rise by anything up to a further 2% by the end of the year.

The scaremongering is based largely on fears that the property market could crash triggered by a myriad of loan defaulters, many who borrowed vast sums of money when rates were low.

They say that in turn could lead to a recession.

It’s all good clickbait, fills columns of newspapers and online content and hours of commercial television.

Even the respected Australian Financial Review sprouted an opinion piece declaring “Aussie house prices could fall more than 30pc”.

Here’s why the house won’t come tumbling down.

The safest investment in the world

The 32nd President of the United States, Franklin D. Roosevelt, once famously said, “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world”.

It’s only reasonable to assume and expect small corrections to follow a period of enormous growth.

Rising interest rates will fuel those corrections.

But the biggest drop Australia’s property market has ever seen was just 9.9%.

That was after the 2016-17 credit squeeze leading into the 2019 election, and fuelled by fears of changes to negative gearing laws.

It’s true, there are many factors working against the property market as we enter the second half of 2022, most driven by rising interest rates, rising inflation and waning consumer confidence.

Others include:

Affordability – Post-boom expensive housing is now beyond the reach of many more buyers with interest rates rising.

Reduced demand – There is a finite number of buyers and sellers in the market. Many have made their move in the last 24 months and are now content to sit.

Urgency is gone – With prices no longer rising rapidly, the desperation to buy before prices rise further no longer exists.

Reasons for Australian property optimism

Despite all the morbid Mauds warning of dark times ahead, the property market remains underpinned by some solid foundations.

Recent history suggests it is not in the interests of the government, the Reserve Bank of Australia or our commercial banks to be party to the crashing of the housing market.

Nearly every home seller becomes a home buyer and people will only be forced to sell if they can’t meet their mortgage payments. 

Crashes are only triggered by homeowners who are forced to sell well below the value of their property.

But with national unemployment sinking to 3.5% in June 2022, just about everyone who needs a job can find one.

Here are the biggest causes for optimism:

Employment levels – while inflation and interest rates are testing the resources of many, unemployment levels remain extremely low. No-one will have to sell their property because they lost their job and cannot find work.

Supply and demand – Demand for housing remains strong and outweighs supply. That is unlikely to change any time soon with the building of new dwellings stifled by increased production costs and labour shortages.

Immigration – Demand for housing will continue to rise as Australia reopens its borders to immigrants.

Smart borrowers – Commonwealth Bank CEO Matt Comyn recently reported that three-quarters of their loans are two years ahead on repayments. This gives people plenty of wiggle room as rates rise.

Cash reserves – Australians have saved for a rainy day with as much as $250 billion in various bank and offset accounts.

Wages – Wages are slowly beginning to rise, easing the pressure on homeowners to meet repayments.

Banking system – Australia’s banks follow strict lending terms, leaving very few loans dishonoured.

Government incentives – These remain in place to encourage more first-home buyers into the market.

Get advice today

Economic conditions never remain static for long.

But it’s important not to be swayed by all the predictions of doom and gloom and keep your investment and property accumulation goals on track.

Few people who bought property in Australia with a long-term outlook have lost money on their investment.

There will be fluctuations and corrections from time to time but it is important for homeowners and investors to hold their nerve.

That’s why getting the best possible advice, and the best possible finance deal, for your investment strategy is so crucial.

Calder Finance Broking are specialists in the business of home loans and property finance in Adelaide and across South Australia.

We pride ourselves on leading our clients into the future with structure, financial stability and confidence. 

Contact us today to get started or discuss all of your finance needs and concerns.

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.

Written by Hayley Walsh from Calder Finance Broking, for more information please visit the Calder Finance website. Please note that Calder Finance Broking Pty Ltd is a Corporate Credit Representative of BLSSA Pty Ltd ABN 69 117 651 760 ACL 391237.

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