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Mark Bouris has told Sky News Australia that he is predicting property prices to buck the current upwards trend in the coming months, as we approach the ‘spring-selling’ season.
New analysis from NAB suggests that the official cash rate will continue to rise, with another two rate hikes predicted by the major bank, taking the cash rate from 4.10% currently, to 4.60%.
If this prediction plays out, Bouris says he expects housing supply to increase as mortgage holders begin to feel the true impact of these historic interest rate rises.
“People are hanging out to see whether or not this rhetoric which we’re hearing at the moment, ‘oh, house prices are going to go up’, before they sell,” Bouris told Sky News Australia.
“If they don’t see that period, they’re going to have to sell, and they’re going to sell to a big supply market.”
House prices have been on a steady rise in recent months, as CoreLogic reported three successive months of property price increases, “with the pace of growth accelerating sharply to 1.2% in May,” according to its monthly Home Value Index report.
“After finding a floor in February, home values increased 0.6% and 0.5% through March and April respectively.”
Despite this trend, Bouris said that price growth will not persist:
“First and foremost, the thing that creates an increase in property prices is when either one of two things occurs.”
“First, if demand outstrips supply, in other words, we get an increase in demand. And usually an increase in demand is caused by more affordability, and more affordability is created when interest rates fall.”
“I do not expect to see interest rates fall over the next six months or up to January, February next year. And therefore I don’t expect to see affordability of houses at the current price increase.”
“The second thing that can create house price increases at the same rate that we had in the last six months is if all of a sudden supply stays the same, in other words, stays very low.”
“I’m expecting, come the spring period, like August, September, October, supply to increase because we’ve had a low supply of housing over the last six months. And I expect it to increase and when supply increases, house prices tend to go down, not go up.”
But why would housing supply suddenly go up, thus pushing prices down? According to Bouris, because many mortgage holders currently on extremely low, covid-era fixed interest rates, are about to come off that fixed period. The variable rate that their home loan will soon move to is going to be, generally, two to three times higher than their previous fixed rate.
“House supply will increase because the fixed rates are going to start to bite, and we’re going to have a longer enduring period of sales,” Bouris said.
See Mark’s appearance in full by clicking the video above.