“Will property prices now start going up?”
No matter which direction the property market is heading my clients and friends are always asking “when will prices start to rise or fall? Can you give me a time frame Mark?”
And while my response is the same every time, “no one can know for sure!”
One thing that always directly influences prices of most assets is the availability of credit.
(money in the system financiers are willing to lend and the level of conditions on that money)
Less credit/stricter lending conditions = less demand
More credit/easier lending conditions = higher demand
The tide definitely looks like it’s beginning to turn in the opposite direction with relation to the availability or credit and ability for Australian’s to borrow
Understand credit market cycles and you will understand how to stack the odds in your favour
Economists are forecasting several interest rate cuts, with some predicting it could get as low as 1% by December.
These changes are hoping to make a difference in consumer spending and boost the economy.
A decade ago, household disposable income increased by 6%; compared to the past 3 years the increase has moved at an average rate of just 2.75%.
It is clear that households have adjusted their spending plans as income growth has slowed.
Some people are opposing the interest rate cuts as they believe Australians are already heavily indebted and stimulating borrowing at this time is likely to cause long term issues.
If borrowing capacity does increase, borrowers will need to use their own discretion to anticipate their ability to service the loan. First home buyers especially should be cautious and avoid borrowing close to their limit to avoid having issues in the future.
The next decision will come from the Australian Prudential Regulation Authority (APRA) regarding potentially lowering the serviceability buffer, which is currently at a minimum of 7%.
If this is lowered, borrowing capacity would increase by 10%.
The combination of interest rate cuts, easier lending conditions, and number of Government incentives for First Home Buyers, is likely to give the Australian property market another boost and re-energize the economy.
What do you think about this? Leave your comments below!