According to the author Denis Mackenzie, As you may be aware, the real estate markets of all countries have risen and fallen in recent years. However, when the US began seeing an unusual spike in interest rates in March of 2020, it resulted in a collapse in the Australian housing market as investors simply switched over to the safe haven of home ownership. One reason for this was that the housing bubble, much like that of the US bubble, was fueled by home loans that were secured against US currency, making them less attractive to foreign investors.
The falling interest rates that helped push prices down in the US made it all the more difficult for Australian investors to purchase real estate at artificially high prices. Once again, the Australian property market took a hit as home owners looked for alternative investments like purchasing shares and bonds. However, the Australian government is doing its part to stimulate the market with the introduction of a new policy that will see the introduction of tax incentives for first home buyers in order to increase their chances of being able to afford a house.
Similar to the situation in the US, rising interest rates are also starting to negatively impact the Australian market. In the past, one of the ways that Australian property investors were able to afford housing was because interest rates were low-risk loans made up for the differences in interest rates with their purchase price. Because the interest rates began to rise, this change in the marketplace caused the price of houses to decrease, making it harder for investors to purchase, but also causing home owners to take on more loans to afford their houses.
Rising interest rates has also forced home owners to sell. Rather than having the potential buyer wait until the prices get too high for the potential homeowner, they chose to cash out and sell their property to avoid being priced out of the market. In many cases, the prices are simply too high for first home buyers. In some instances, the home owner can sell their property for six figures or more, while a comparable property would sell for close to two to three times that amount.
Investors that do decide to sell their homes are experiencing a similar thing. Since first home buyers can no longer afford their homes, sellers and investors are starting to look for alternative avenues to sell their homes. In many cases, they are turning to the US market as a safe haven, trading their property for shares and bonds.
In a nutshell, the Australian government has taken a number of steps to try and slow the rate of interest rates rising. The introduction of the first home buyers’ tax incentive has been implemented in order to provide financial incentives to first home buyers, which has given them the ability to afford a property. Additionally, banks have changed the way that they report house sales by reducing interest rates on mortgages.
Another change that has occurred is that the Real Estate Institute of Australia has said that it will no longer allow members to provide information about house prices based on interest rates. While this change is meant to protect the integrity of the real estate market, it does limit the scope of Australian investors to gather accurate information about the real estate market. It remains to be seen how long this policy will last, however, as with rising interest rates, there will be another opportunity to gather this information.
With home prices being forced up to the highest point in over five years, many first home buyers are either looking to transfer their home or are facing the loss of equity on their homes. If you are interested in buying your first home, you may want to check out where your local real estate market stands. Investing in property in Australia is now a lot more attractive to first time home buyers, but it will take some time before the markets stabilize and people start to realize the true value of the Australian dollar.