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Mark Bouris recently joined Channel Nine’s Today Extra to discuss new research from Domain that suggests Australia’s property booms last more than three times longer than downswings on average and when prices fall they only lose a fraction of the gains made.
The research from Domain analysed housing data over the past three decades and found that in past property booms, house prices rose on average over 32% across the capital cities, with ‘boom periods’ lasting just shy of three years (33 months). This is compared to housing price ‘downswings’, where house prices declined just 3% on average, with ‘downswing periods’ lasting only an average of 9 months.
However, Bouris and other economists have suggested that the unique period of extraordinarily low interest rates over the previous few years may mean that the current downturn may last longer than the averages suggest.
Bouris said, “ …because we have come off such low rates, and are now pushing up to such high rates, relatively speaking to the low rates we experienced, there are a lot of economists saying we’ll never see that bounce back over such a short period, rather we’ll see the bounce back over a longer period.”
So predictions suggest that the housing market bounce back “might take 18 months” instead of the average of nine months.
“We might experience this downturn for an 18 month period right, because we are going to go back up into a much higher rate period.”
Mark was quick to point out that the extremely low interest rates throughout Australia following the COVID outbreak were a necessary reaction to ensure Australia’s economy could withstand external pressures.
Does that mean interest rates were simply too low for too long?
“Probably, in hindsight,” said Bouris, “But who knew what COVID was going to do? And we were coming off the back of the GFC. So yes, I think they did get too low and there was just far too much stimulation in the economy, which pushed our house prices up nationally – far too high. As a result of that, you’re going to have to expect to come back to a normalised position.”
What should nervous home buyers be doing?
“I always say, if you have the deposit, your lender has approved your loan, which means you can afford to borrow the money, and if you think that your income is stable and safe, then if you find the right place, buy it, because you’re not trying to buy it to flip it,” said Bouris.
“If you’re looking to purchase a home to turn it around and sell it for a ‘quick’ profit, that may be a problem” according to Bouris, “but if you’re trying to buy something that you want to hold onto for 10 years, then now’s the time to buy it.”
Thinking Longer Term
“If you find the place you like – buy it, continue to pay your mortgage off, and ride through these difficult periods. Have a 10 year horizon in relation to whatever you do in terms of buying property. If you think you’re gonna get to the bottom of the market, that’s a problem. Because I can say one thing. There’s been a strong confluence of events over the past week, which has indicated that the property market is actually trying to level out right. And we are getting better clearance rates for auctions now than we’ve had in the last four months.”
If you’re concerned about your mortgage repayments or you’re concerned about entering the property market in the current environment, now is the time to chat to a YBR Home Loans mortgage broker.
Our home loan experts can assess your options and shop around for the best possible deal to meet your circumstances. With a little bit of preparation, you can weather any rate rise storm.
If you have any questions, reach out to our home loan experts today!