There is something about Spring which seems to invigorate and inspire us every year. As the weather transforms we can start to enjoy brighter and warmer days. We can sense a buzz of excitement and motivation in the air.
Typically, for us at CANE Financial, it is our busiest time of the year. Our clients are eager to make things happen and move forward in attaining their property and wealth goals. Focus is sharp, decisions are being made and momentum is high.
While moving into Spring typically signifies a heating-up in the property market, this year we are seeing the market cooling down after a prolonged housing boom.
I was at a McGrath breakfast event last week where John McGrath spoke about the current Sydney property market and what he believes we should expect to see based on historical trends.
He reinforced that the market has slowed; auction clearance rates and housing stock have both reduced. He suggested that we could see the market come back up by around 6% over the next 12 months.
I agree with his sentiment and have a few of my own comments to add based on my experience in the industry and understanding of other influencing factors.
Historically, after a property boom the market levels out and the value of properties reduce by half the gain of the previous year (hence the 6% reduction mentioned above as the average house price in Sydney grew by 12% last year). This is simply a correction and isn’t anything to worry about considering the market has grown significantly over the last four to five years.
The lending landscape is also a key contributor to what we’re seeing in the property market. As loans are harder to secure so there are less buyers in the market to drive up prices.
We haven’t seen this much tightening of lender credit policy and movement in interest rates in years’ and because of that consumers feel a little nervous as they adjust to the changes.
Regulatory bodies, such as the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA), are cracking the whip to ensure lenders are acting responsibly. This has made a considerable impact on home loan rates whereby owner-occupied loans with Principal and Interest (P&I) repayments are now substantially more attractive than Interest Only loans. Investment loans are now higher priced in an attempt to slow the investment market.
The key take-away is, it’s getting harder to secure a loan and now with all the changes in rates there is certainly opportunities to ensure you are well positioned. It’s never been a better time to review your situation and options.
Craig Forman, Director CANE Financial