The end of the Property Market? I don't think so.
The below article from the Sydney Morning Hearld this week talks about 10 national property price downturns we have had over the last 40 years. In the last 10 years there has been some big corrections in pricing, however with the property market and related industries taking up over 12% of Australia’s economic activity and productivity each year when property falls the negative flow on effects for the property industry, building industry, the banking sector and other interconnected industries force the economy to slow and unemployment goes up. Once this happens the Reserve Bank lowers interest rates and prices pick up again fairly quickly.
The upshot of the market is that there is still a shortage of properties especially on the Northern Beaches and until it is easier to build new dwellings then prices will continue to rise in the medium term. I feel the market is 10% cheaper than in October last year and as such it is a great time to be buying. I think market expectations will change to a stable interest rate setting soon. Combined with a shortage of stock that is when prices will start to pick up.
"Home values have fallen by more than 3.5 per cent in Sydney and Melbourne since this property downturn began, and experts warn the trend could have longer to run. Before this year, Australia has recorded 10 national property downturns in a little over four decades, of which seven lasted less than a year and three lasted longer, Cotality figures show. This time, prices are tipped to keep falling until any sign emerges of an interest rate cut, which could be some time away.
In Melbourne, dwelling values have been falling for seven months and are down a cumulative 3.7 per cent. Sydney has been in a downturn for most of the past seven months, falling 3.6 per cent, on Cotality data. Because the mid-sized capitals of Brisbane, Perth and Adelaide continued to rise after interest rates went up this year, values across the combined capital cities have fallen only 1.3 per cent over three months.
When regional areas are included, the national drop is even more modest at 0.7 per cent in three months. Among previous national downturns, two lasted less than six months, five lasted between six months and one year, and three took up to two years – but none longer than that. Dwelling value falls maxed out at less than 8 per cent. Sydney’s deepest falls were in 2017-19 when the bank regulator clamped down on interest only lending, banks became more cautious under the scrutiny of the financial services royal commission, and investors expected a change to negative gearing rules in the 2019 election that did not happen. Over 23 months, Sydney values fell 13 per cent. Sydney lost 12.4 per cent during 12 months over 2022-23, when the Reserve Bank, having said its central scenario was a rock-bottom cash rate until 2024, embarked on a steep hiking cycle to crush an inflation outbreak.” - SMH
