Softening property market & RBA's interest rate hike in June 2022

virhlpool on 30/05/2022 - 16:12
Last edited 30/05/2022 - 16:49

Has anyone started to observe that property market has softened at least in VIC and NSW? With another potential interest rate hike by RBA coming up in June, do you reckon the market will continue to soften further?

Most importantly, what will be the length (in terms of years/ months) and severity (% price reduction on average) of the downward cycle in your opinion?

Not planning to buy or sell in the near future - just keeping an eye on the economics of real estate and trying to learn a thing or two from you folks.

Financial

Comments

  • GG57 on 30/05/2022 - 16:14
    +7

    I think the property market will be driven by demand.

  • gaz3342 on 30/05/2022 - 16:18
    +9

    50% drop by 2025.

    • Jason Genova on 30/05/2022 - 16:22
      +11

      or 50% increase by 2025 also possible

      • gaz3342 on 30/05/2022 - 16:23
        +2

        Correct!

      • ihbh on 30/05/2022 - 18:15

        No bloody way.

      • Brodo Faggins on 07/06/2022 - 00:52

        Blood in the streets more likely imo

    • AustriaBargain on 30/05/2022 - 18:10

      Back to normal. Or closer to normal.

  • djones145 on 30/05/2022 - 16:18

    have you noticed the same ad for houses and they haven't sold
    have you seen more houses being sold before auction
    have you looked at recent sales and though that's a ok price
    have you seen more apartments being sold
    have you tried to get a loan but had the amount you can borrow be lower than before
    are real estate agents spamming you with emails and calls?

    • MrBear on 31/05/2022 - 10:51
      +2

      So many questions, but only one question mark.

      • moar bargains on 31/05/2022 - 12:29
        +1

        Here's the rest:
        ?
        ?
        ?
        ?
        ?

      • djones145 on 05/06/2022 - 21:21
        +1

        so many questions
        so little answers….

      • Brodo Faggins on 07/06/2022 - 00:53

        It's actually 1 question, so you have to ask everything in 1 breath 🤣

  • brendanm on 30/05/2022 - 16:20
    +3

    Length:6
    Severity:4

    • GG57 on 30/05/2022 - 16:31
      +1

      Sounds like an earthquake I experienced

    • freefall101 on 30/05/2022 - 17:55
      +2

      Sounds like an erection I experienced.

      Doctors also said it wouldn't rise again until 2024 and they were wrong about that too.

      • brendanm on 30/05/2022 - 19:56
        +1

        We really can't trust these experts at all.

      • RecklessMonkeys on 31/05/2022 - 10:00
        +1

        The housing market has had all the viagra it can take.

  • Jason Genova on 30/05/2022 - 16:22
    +2

    sounds like youre trying to time the market and buy

    expect rates to exceed well beyond what the RBA say theyre gonna raise it to. remember how they said rates wont rise til 2024 ;)

    • Archi on 30/05/2022 - 16:39
      -1

      remember how they said rates wont rise til 2024 ;)

      yes that was also before covid, and the rise in inflation, stock shortages, supply chain issues and china shutting down

      • Drakesy on 30/05/2022 - 17:01
        +9

        Before Covid we were in a recession

        We never really got out of it. The coalition dropped a $750 billion debt bomb to mask it.
        Unfortunately the hangover will last a while.

        • Boogerman on 31/05/2022 - 07:46
          +2

          Good call.
          Building companies are collapsing left, right & centre every week - the good part out of this is that Scomo's tradies didn't win him the election with this quid pro quo (Home Builder)

  • SF3 on 30/05/2022 - 16:43
    +2

    OzArmChairEconomist. The value of the advise is the cost you paid.

    do you reckon the market will continue to soften further?

    It better!

    downward cycle in your opinion?

    Ask the Crystal ball.

    • brendanm on 30/05/2022 - 17:02
      +1

      advise

      Reeeeeee

      • SF3 on 30/05/2022 - 17:20
        +2

        Way of the BargainOz ;)

  • TheMindsetTraveller on 30/05/2022 - 16:48

    Sydney was booming over the weekend with people out and about, celebrating and enjoying life. It felt like New Year's Eve. It is hard to get restaurant reservations over the weekend, hotel prices are out of this world, and people are keen to spend on discretionary things.

    All this hoo-har about interest rate rises, higher inflation, poor wage growth and property prices coming down - is not affecting many out there.

    • virhlpool on 30/05/2022 - 16:51
      +1

      All this hoo-har about interest rate rises, higher inflation, poor wage growth and property prices coming down - is not affecting many out there.

      Irrespective of whether it is affecting people or not, it's affecting property price for sure. People spending money in the economy is good anyway so it's good to see people being able to spend money on discretionary things.

      • GG57 on 30/05/2022 - 16:55
        +1

        For some people, spending on discretionary things indicates they aren't in the market for property. Demand reduces.

        • virhlpool on 30/05/2022 - 16:58
          +3

          Having not spent enough of discretionary things and overpriced services for over two years due to Covid/ lockdowns, most of us can understand the frustration and urge to spend. I can see people spending money on goods, lunch/ dinner, stays, experiences etc without worrying about prices.. how else can an AirBnB in middle of nowhere get away with $800/ night rate. Let's see how long this splurge continues.

    • Hardlyworkin on 30/05/2022 - 17:37
      +1

      I think that is a sign of the collective joy for people of barely seeing Scomo's smug face anymore!

    • morse on 31/05/2022 - 02:10

      The pain doesn't come until people can't manage their debt and default on their mortgages. The people who are going to struggle are those not tightening the belt now if they need to - typically those people won't until it's too late. I don't know for sure that's going to happen to many, but it will be in 9-12months if it does happen.

    • Boogerman on 31/05/2022 - 07:47
      +2

      The plural of anecdote is not data

  • apsilon on 30/05/2022 - 16:50
    +3

    I'm not in the market so haven't looked but I think we'll see prices of existing houses rise even quicker as people will shy away from building new with companies collapsing all over the place.

    • virhlpool on 30/05/2022 - 16:53
      +2

      When though? The downward cycle has ALREADY started - so it has to stop and get reversed for your statement to be true. ;)

      • GG57 on 30/05/2022 - 16:56
        +2

        apsilon is suggesting that demand for existing property will increase, with a related downturn in demand for new-builds.

      • brendanm on 30/05/2022 - 17:04
        +1

        The downward cycle has ALREADY started

        Care to show your working?

        • virhlpool on 30/05/2022 - 17:08
          +1

          It's not my working mate. Just check out WoW and MoM property price movement data online.

          • brendanm on 30/05/2022 - 17:13
            +3

            @virhlpool: I have no interest to, I thought you'd be able to link to some actual data.

          • TheMindsetTraveller on 30/05/2022 - 19:15

            @virhlpool: And if you are so certain the movement is downward & have the data, why did you open this thread for? For fun??? Hhhahhahaa

            • virhlpool on 30/05/2022 - 20:49
              +1

              @TheMindsetTraveller: The thread is not to find certainty.. Discussion or debate is made of all different types of views/ opinions and logics. That's what the thread is for.

  • Drakesy on 30/05/2022 - 17:03
    +5

    House prices correlate closely with interest rates.
    You'd be stupid to think that house prices will rise if interest rates go up.

    It's counter intuitive.

    • virhlpool on 30/05/2022 - 17:06

      Yes but it all depends on how long the RBA has to keep increasing rates. It looks like the Fed will end up increasing less than expected earlier: https://www.cnbc.com/2022/05/10/aprils-consumer-price-index-…

      • Drakesy on 30/05/2022 - 17:08
        +4

        Notably the Fed's interest rates were higher than ours, we were effectively at zero.

        basically we're more prone to interest rate rises than America as we loaded up on debt at the bottom.

        • Boogerman on 31/05/2022 - 08:04

          Bang on

        • Brodo Faggins on 07/06/2022 - 00:57

          hey Drakesy mate - OzB have been patiently waiting for you to make an economics post and share your wisdom. Keen to have some intelligent people get a discussion going!

    • brendanm on 30/05/2022 - 17:11
      -1

      Hmmmm, property prices actually rose from 1990-95?

      • Drakesy on 30/05/2022 - 17:41

        i guess 2000 - 2008 was the last time property prices went up in line with rate hikes.
        But that was a different time

        I don't think it's going to crash per sae, but it will definitely plateau.

        • Boogerman on 31/05/2022 - 08:02

          2000 was when lil Johnny Howard brought in the 50% capital gains discount - that had a huge bearing on investment property holdings
          And, as per your graph, interest rates fell from 1990 to 95, so yes, house prices do correlate closely (inversely) to interest rates

    • TilacVIP on 31/05/2022 - 09:24

      Yet some people clearly do, as per this thread. Hmmmmmmm

  • Pcosmic on 30/05/2022 - 17:48
    -4

    Stop trying to hope that the prices will go down. It will not.

    • freefall101 on 30/05/2022 - 18:01

      Basic supply/demand, there are several million people hoping for the same thing and they will buy at every price point on the way down.

      It's more likely the reserve bank will let inflation go high than burst the housing bubble and throw people out of their homes, making it more affordable. The government painted them into a corner on that one.

    • capslock on 30/05/2022 - 18:40
      +9

      You must have bought a house in the past year.

    • TilacVIP on 31/05/2022 - 09:25

      And you know this how?

  • capslock on 30/05/2022 - 18:39
    +3

    After the 2017 peak, prices didn't rise for two years. I think it will be the same this time.

  • Tiredman on 30/05/2022 - 19:37

    Going to start looking around second half of the year.

    • Boogerman on 31/05/2022 - 08:03
      +1

      FYI, house prices are forecast to fall until 2024

  • buderim11 on 31/05/2022 - 07:20
    +4

    NZ housing market is not looking to good. https://www.macrobusiness.com.au/2022/05/bottom-falls-out-ne…

  • Boogerman on 31/05/2022 - 07:54
    -2

    Gotta love the ignorance in this thread.

    “Anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that 'my ignorance is just as good as your knowledge.'”
    ― Isaac Asimov

    The one great thing the pandemic exposed was how millions of people utterly hate education & experts, borne out of cognitive dissonance, from their own relative lack of education.

    FYI, you can forecast house prices (already have started falling in the last quarter in Melbourne & Sydney). In fact, Christopher Joye of Coolibah Capital has stated that its easy to do.

  • The tiger on 31/05/2022 - 08:16
    +3

    Honestly I have been wondering how these people can afford to buy properties ( now considered average) for easily over one million dollars? Average is applied to South East Melbourne for a 3 to 4 bed roomed house.

    • Jason Genova on 31/05/2022 - 08:33
      +2

      dont need to wonder, they're upto their eyeballs in debt, any interest rate movements means they're up shit creek without a paddle

  • Mugsy on 31/05/2022 - 08:39
    +1

    As with most cycles, you'll see softening markets in Sydney and Melbourne first.

    I wouldn't make a call on an entire state as parts of regional NSW have been flood affected.

    Brisbane is a tough call this time around. Historically, Sydney and Melb is an indicator for Brisbane but with the floods a few months back wiping out hundreds of properties and interstate migration to QLD/Brisbane still high, we may see property prices sustained in Brisbane for both sales and rental markets. We know supply is constrained… just depends on how long demand remains high for.

    • GG57 on 31/05/2022 - 09:09

      Exactly.
      There are many, many reasons why the level of demand changes. Interest rates is one of those.
      If wages were increasing, that could negate interest rate rises.
      Internal migration increases demand, at least in some locations.

      And, even where demand does not increase, the level of supply impacts on the rate of satisfaction for the demand.

      • Mugsy on 31/05/2022 - 10:34

        Yeah, it's quite a lot of variables to guess with.

        So in summary, so far in Brissie we have the following propping up the property market…

        • reduced supply from floods
        • increased demand from interstate migration
        • increased demand from 2032 Olympic Games
        • low rental vacancies
        • a rental price pinch (which makes buying still desirable for some)

        The only things working against property growth…
        - increased interest rates
        - low wage growth
        - cost of living increases but point 4 in the +'s negates this for some

        I'd say interest rates will have to go up by a decent amount to slow growth in Brissie. People still want to move up here due to the colder climate down south making covid a more serious breeding ground and that property expenditure down in Sydney and Melbourne really is much higher than Brisbane still.

        • GG57 on 31/05/2022 - 10:42
          +1

          I agree with your analysis.

          In relation to southern-state migration to Qld, there is one more consideration that I think a lot of people are overlooking. The warmth is certainly appealing, but the increased frequency, and apparent increased intensity, of 'weather events' over recent years, particularly further south than usually experienced, could be seen as a potential concern (if those same patterns continue, or increase further).

          • Mugsy on 31/05/2022 - 11:00
            +1

            @GG57: Good point. Whilst the rain and floods in Brisbane have been pretty horrible of late, they get that in many places down south too in addition to bushfires. Plus plenty of non-flood affected areas in Brisbane. Certainly the better place to be.

          • Mugsy on 01/06/2022 - 08:30
            +2

            @GG57: The data seems to confirm our discussion…

            https://www.abc.net.au/news/2022-06-01/house-price-index-cor…

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