Australia’s property market boom may be slowly coming to an end. According to the Commonwealth Bank, prices are expected to peak in 2022 before sinking 10% in 2023, as higher borrowing costs and ‘natural fatigue’ set in.
Experts suggest a number of indicators are signalling the increase in property prices is beginning to lose steam. In October 2021, the minimum interest rate buffer on a borrower’s ability to make loan repayments was expanded from 2.5 percentage points to 3 percentage points. Banks have also lifted their fixed-rate mortgage costs, reflecting their own higher cost of capital as investors’ expectations about inflation have picked up recently.
We understand that some real estate agents expect the decline in housing prices is likely to have a significant impact on the industry, potentially hurting current home owners that are heavily financed, due to higher interest rates and repayments, as well as facing lower property values. However, this may be welcome news for investors who are considering entering the market when property prices start to lower.
IBIS world experts in the building and construction industry are also expecting a price decline to start in 2022. The industry may feel pressure from the market to drive down building costs, as housing prices decrease. As the prices of property fall and investors look towards taking advantage of this by purchasing existing properties, the demand for the building and construction of new homes is likely to fall.
In late 2020, the government implemented the HomeBuilder scheme to help stimulate growth in new house construction and significant renovations. Industry experts forecast this significant growth to fade in the early stages of 2022, leading to a significant decrease in the demand for new house construction.
The recently announced Windfall Gains Tax, which will commence from 1 July 2023, is expected to create a rise in the average cost of land. Real estate agents and builders are concerned this may create hesitancy from investors to build new homes and may lead many to look towards purchasing cheaper existing homes.
If you would like assistance implementing a plan to optimise your business operations during the upcoming years with changing property prices, please contact Kieren Henderson on 03 5443 0344 or email email@example.com