Every newspaper article you read says Sydney and Melbourne housing prices have fallen. The amount they have fallen by varies on the day and the paper you read but most hang around 5 to 10%. With the cost of borrowings higher, most analysts expect further falls in property prices of our two big cities of 10% or more.
The tightened lending policy restrictions and recent rate rises from ANZ, Commonwealth Bank, Westpac and a number of small lenders have contributed to the fall. In saying that, no one is expecting the RBA to lift the cash rate this year. The call on when the cash rates will be lifted continues to be extended. The estimated time frame depends on which bank you look at. Macquarie Bank are suggesting that falling house prices, and uncertainty about the outlook for housing activity and credit availability, give rise to the RBA to sit tight on the cash rate until early 2020.
What does this mean?
If you aren’t looking to sell and your property is a long term investment, it doesn’t mean too much, sit tight and ride the next wave.
For first time property buyers, saving a deposit may be easier if house prices drop, but the cost of funding will be higher.
For those looking to upgrade, as lending standards are becoming tighter, you might want to do your homework before applying for a loan on a more expensive property. However if you are jumping in and out of the market at the same point in time you will be no worse off. If you decide to sell and wait for the market to fall you are taking a bet on the market movement.
For investors, the cost of funding will be higher and the credit restrictions mean it will be harder to obtain a loan. Again if you are waiting for the property market to fall you are taking a risk. Will it decrease slightly? Probably. Will it remain stable? Possibly. If you find the right property at the right time and it’s a long term investment you will be right to ride the wave.
We can’t say with certainty what will happen, only time will tell, but we can advise you on the best direction for your situation.
Are you looking to enter the property market or would like to discuss your current properties? Take this opportunity to get in touch with BLG Business Advisers online or by calling (02) 4229 2211 today.