It ain’t over until…

I am alert but not surprised at the number of people who think falling property prices are over. The fat lady is asleep in the dressing room.

It’s true Sydney and Melbourne auction clearance rates have stabilised but these are on very low volumes. Perhaps there is a bit of a pre-election rush to negatively gear.

In a speech last week on the housing market, Reserve Bank Governor Phillip Lowe said

At some point, though, the lower prices draw more buyers into the market. First home owners find it easier to buy a home, investors are attracted back into the market, and trade-up buyers take the opportunity to upgrade to the home they have always wanted. These shifts in sentiment and momentum are seen in most housing cycles, but their precise timing is difficult to predict.

This price correction has more to do with the withdrawal of credit and a reversal of crazed price rises.

The re-setting of interest only loans to principal and interest has some way to go and will cause many borrowers a lot more pain in the next two years.

More economists are jumping on the “two interest rate cuts” big call by Bill Evans at Westpac

Dear clients; Dear nieces and nephews:

I think its way too early to jump into property. This price correction has some way to go.

The fat lady is not even warming up – she is sound asleep having a siesta in her dressing room. Take a cold shower and don’t even start looking for 12 months.

Tony Bates
Senior Wealth Advisor

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