The ‘weak’ property market in Australia, according to a self-described investment expert, is about to implode due to owners’ increased debt loads and soaring interest rates.
A YouTuber named Hamish Hodder who makes videos on stocks and investments described how the nation’s housing market has altered recently and was likely to see further change in the future.
The Australian market, in particular, is in a very vulnerable situation, he said. “Property is like any other hazardous asset – there are pressure points, specific characteristics, government regulations, and economic circumstances that make the investment more unstable.”
Since Australia, unlike other nations, often does not have long-term fixed rate loans beyond four years, many Australians would be “exposed” to the higher rates even if they are on a fixed rate.
He said, “Higher mortgage payments have two implications.”
One is that it reduces the appeal of real estate investments; in other words, as a result of the greater cost of borrowing money, prices must decrease and rental yields must rise in order to balance the increased cost of debt.
The second result is that individuals may actually be forced to sell their homes or fail on their loans as a result of the higher payments.
In reality, decreased property prices are the result of both of these reasons.
Hodder said that, starting in September, real estate values had fallen nationwide over the previous month, quarter, and yearly.
He said that it was uncertain how much Australian real estate would decline in value during the next years.
“A lot of what happens next actually hinges on what happens with inflation over the next 24 months and how the RBA responds to what inflation did over the following 24 months,” says the RBA.
“The Reserve Bank will probably want to, and need to, boost their official cash rate and that will continue to harm the housing market for as long as that goes on,” says the Reserve Bank. “If inflation for the long term continues to be substantially over the two to three percent healthy level, then.”
The typical borrower now pays $715 more per month in mortgage repayments as a result of the continuous monthly increases.
The rate increases are primarily to blame for Australia’s rapid decline in the median home price, which fell by 1.6% in August and another 1.4% in September.
According to CoreLogic statistics, the median home price has decreased by 4.5% from the year’s commencement.
The typical home price in Sydney was reduced by more than $114,000 throughout the course of consecutive monthly declines in property prices between April and August, or $927 per day.
In contrast, the typical property price in Melbourne fell by 4.4% between April and August, amounting to $51,000, or $415 per day.
Some experts predict that after the RBA interest rate increases take full impact, the median home price might drop by up to 25%. This is because further RBA interest rate increases are likely.
House prices might ultimately give up the 30% increases they saw during the Covid era, Mr. Pape said in his Monday piece for The Australian Business Network.
“That is a lot. He said, “It’s the kind of jolt to the system that sends an economy into recession.”
The RBA’s decision to raise interest rates will have a significant impact. However, the RBA’s ability to predict interest rates, which they determine, has been compared to my youngest son’s ability to urinate while standing.
The sixth straight rate increase by the RBA, 0.25 percentage points, was less drastic than prior increases.
Some analysts have updated their predictions for the peak in the cash rate as a result of the unexpected change to a slower pace of tightening.
The cash rate is anticipated to reach a peak of 25 basis points higher than the previously predicted 3.35 percent to 3.6 percent in May of the following year, according to ANZ analysts.
The bank’s analysts believe that the RBA’s move to lower interest rates by 25 basis points would prolong the cycle of rate increases and may possibly compel the bank to boost the cash rate higher than anticipated.
According to ANZ economist David Plank, “the slower pace of rate rises raises the likelihood that rates need to go higher than previously predicted, if demand remains too robust and sentiment is first buoyed by the RBA’s moderation.”