Looming loan restrictions could mean a shift in property prices

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Looming loan restrictions could mean a shift in property prices

With demand greatly outweighing supply, houses are selling well over reserve at auction and recent COVID-19 restrictions have affected property sellers’ willingness to go to market.

While this property boom strengthens some sectors of the economy, there are numerous economic implications. With houses skyrocketing in price, Australians yet to enter the market are seeing their chances of buying a property grow slimmer.

However, there is still high activity in the market for those with the capital to spare. But with higher prices comes higher property loans, as Australians are borrowing more in order to secure a property. Around 22% of all borrowers are now taking out loans that are six times larger than their annual income.

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The current property boom highlights a disparity amongst Australians

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The current property boom highlights a disparity amongst Australians

With the start of 2021 came an unprecedented growth in property prices, mortgages, and auctions. Several factors such as record low interest rates, decreased spending on recreation and holiday due to COVID, and government incentives spurred movement in the housing market, as Australians took the opportunity to invest in property.

In July, housing values in Australia increased by another 1.6%, bringing housing values to 14.1% higher over the first half of 2021, and 16.1% higher over the past year, as reported by CoreLogic. Australia’s property market has not seen this pace of annual growth since February 2004.

A combination of record low interest rates and active listings at approximately -26% below the five-year average in contrast to dwelling sales which have reached 40% above the five-year average has contributed to the property boom.

Increased housing values have allowed existing property owners to reap benefits, while despite lowering interest rates, prices soar out of reach for some looking to get in the market.

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What happens if rates go below zero?

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What happens if rates go below zero?

Even before the advent of COVID-19, Reserve Bank governor Philip Lowe told Federal Parliament’s Standing Committee on Economics that the RBA was prepared to do “unconventional things” to kick-start a flailing economy. The RBA cut rates to an unprecedented 0.25% in March this year. At its meeting this week it lowered its cash rate target to 0.1%. That is very close to zero - is it possible for rates to go negative?

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Is COVID-19 leading to a regional housing boom?

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Is COVID-19 leading to a regional housing boom?

Amidst the tumultuous times of the current COVID-19 pandemic, we have seen numerous changes in the economy. Unemployment is at a record high, yet there has been a surge in the property market as people move to take advantage of lowering interest rates.

But rather than looking for properties closer to urban areas, housing market data has indicated that there is a rising demand for properties in regional markets of Australia.

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What happened to the price of Bitcoin? The truth behind big bubbles and crashes

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What happened to the price of Bitcoin? The truth behind big bubbles and crashes

There is a boom, as momentum behind a new stock or asset speeds up and the media starts to cover it, fuelling its price rise.

Then the euphoria sets in, the value of the asset skyrockets and people start to make a profit. But looming around the corner is the panic.

Investors feel the last phase of a crash far more than they do the elation of the price rising, Hunt says. Panic breeds more panic and the price falls.

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