Coming up my Friday financial market update for the 2nd of November 2018: and the big question is are property prices going to continue to fall.
So to begin, Core Logic’s final Australian auction results are in for the week ending the 28/10/18 and suffice to say the clearance numbers are weak.
Melbourne’s clearance rate was 48.6% with 13% of auctions going unreported. Sydneys was 45.3% with a 20% unreported figure. Now the unreported figure is important as generally most of these will be uncleared auctions, which means that actual clearance rate is likely much lower than reported.
Corelogic also reported that In the year to October 2018, Australian dwelling values fell by 4.9% at the 5-city level. Sydney is down by 7.4% in the past 12 months.
So an increasingly tough market for sellers but on the upside a good market for buyers.
So the question is will prices continue to fall? Well certainly that seems to be the opinion of ANZ CEO Shayne Elliott who said in the financial review. “I wouldn’t be surprised if it [the house price correction] had further to run … I wouldn’t be surprised if it continued a bit longer.”
Ouch! When the CEO of one of the big four says that, I think it is safe to assume, the property markets downward trajectory is going to continue for some time yet.
Add in the reduction of foreign investment, much tougher lending standards, record levels of personal debt, non existent wage growth, an impending federal election with an almost guaranteed Coalition loss, which means the grand-fathering of negative gearing and the loss of the capital gains tax discount. On top of all that there is the potential for further out of cycle interest rate hikes by lenders.
Now in response the RBA could cut rates but the cash rate is already at 1.5%. I mean how much lower can they go.
So, yes, in my opinion the losses in the property market will continue for quite some time to come.
Having said that, there’s a quote from the great Warren Buffett which is
“Be fearful when others are greedy and greedy when others are fearful”
and I think that is increasingly applicable in the Australia property market.
Opportunities are going to be created as a consequence of this cycle. It is a good time to be a buyer and it is only going to get better for buyers. At the end of the day agents will meet the market. As a buyer keep your emotions in check, do your homework and get some good advice. There will be bargains to be had, that’s inevitable.
So I will finish this video on that note.
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Now for the Disclaimer:
All information provided here is general in nature and is specific to an Australian audience and the Australian finance market.
Thanks for watching and see you next Friday.