It may seem as though every time you open a newspaper there's another story about the sky falling in on the property market. But here's why it's being labelled the “house price fall we had to have”.
We've all seen the news. Auction clearance rates are down, property prices are dipping, loans are becoming harder to source.
Well, Deloitte has finally gone out and put a dollar figure on the downturn.
“In Sydney and Melbourne, housing prices are falling by over $1,000 a week,” says Deloitte partner Chris Richardson.
Rest assured, Deloitte points out that's not as bad as it sounds.
Richardson is quick to channel Paul Keating's famous description of the 1990s recession (“the recession we had to have”).
He says while property prices are falling, they're actually moving into safer territory and the economy will remain robust.
“Yes, (property prices) are falling. But they're not falling at a dangerous rate and it's ... shifting them to safer territory,” Richardson says.
Why are prices dropping?
Prices surged over the past five years thanks to historically low interest rates on home loans, Richardson says.
“House prices here in Australia had streaked past anything sensible by way of valuation,” explains Richardson.
Now, with the banks recently increasing interest rates, prices are dipping. And our nation's two biggest capital cities have been the first to bear the brunt.
The other two major reasons for the price dip are: the banks being more cautious about who they loan to (due to a regulator crackdown) and a dip in foreign investors.
“Despite the house price fall we had to have, Australia’s growth has continued to accelerate, and our ongoing strength is forecast to be good enough - at a smidge above trend both this year and next - to keep job gains solid and unemployment edging down,” says Richardson.
So who's buying?
As you might expect, first home buyers are making the most of the market dip.
ABS data shows that First Home Buyers (FHB) made up 18% of owner occupier mortgages during the three months to August 2018.
That's a six year high.
Over the same three month period in previous years it's been 16.2% (2017), 13.3% (2016) and 14% (2015).
“First Home Buyer participation in Australia’s mortgage market is now at its healthiest since 2012,” says Shane Garrett, Chief Economist for Master Builders Australia.
“Along with the introduction of enhanced FHB incentives in NSW and Victoria, the strong pace of job creation is helping more and more Australians to become homeowners for the first time.”
Keen to get involved?
If you're a potential first home buyer keen to get a foothold in the property market, then get in touch.
As we touched upon earlier, banks are tightening their lending standards. However, we can provide you with valuable information on how to get your accounts in order.
We can also de-mystify the daunting prospect of buying your first home and help you secure a loan with a lender that's a good fit for your situation.
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