The gap between average prices and affordability has widened substantially, and it is unlikely things will turn around anytime soon. And rate cuts are far from certain in the short term.
If you deep dive into where home prices have risen and fallen over the past year, it reinforces the need to go granular to understand what is really going on.
A long period of higher interest rates has put significant pressure on prices in wealthier areas, with some investors forced to sell adding to stock on the market, even as prospective buyers become more reluctant about taking out a large mortgage, coupled with a fear of buying in at current heady levels.
Many properties in areas traditionally been held by investors, have begun to sell as interest rates made breaking even more difficult.
Younger Australians are facing to get into the market unless they previously owned a home (and have accumulated housing equity) or receive money from family members (the bank of mum and dad).
Thus, as never before its important to go granular to understand what is really happening and also avoid simplistic fixes which are politically popular. Fixing housing affordability will take a generation and will require some degree of price correction. Generally, stand alone houses will do better than units in this environment, but again it is important so study the local area and avoid generalisations.
Finally, perhaps its time to move away from the fixation on rising property prices, and regard a home as a place of shelter, not a financial investment. That may not be a popular view, but to me it has great merit. Though the question is – can the genie be put back in the financialisation bottle? Not unless politicians change tack.
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