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CRASH WON’T BE AS BAD AS SOME ARE PREDICTING

Australian property prices proved resilient during the COVID-19 pandemic, and I expect they will remain so despite some scare mongering about the direction of the residential housing market as the domestic and global economy grapples with rising inflation and interest rates continue to head north.

According to CoreLogic, the leading provider of property data and analytics in Australia and New Zealand, Australian home values dropped 8.4 per cent between May last year and December 2022.

ANZ economist Shane Oliver expects home prices to fall another 9.0 per cent, resulting in a top to bottom fall of 15-20 per cent. He believes prices will bottom out in September this year and start making gains when the Reserve Bank of Australia (RBA) eventually starts to cut official interest rates again, possibly in 2024.

Too often there has been talk of a property price crash after the record gains during the COVID era. This is unlikely to happen in Australia with so many vested interests in property, particularly all levels of government and the banks.

At the end of December 2022, the total value of Australian residential real estate was $9.3 trillion. However, outstanding mortgages against all resi- dential housing are only $2.1 trillion – a very comfortable 22.5 percent Loan to Value ratio.

Almost 60 per cent of total Australian household wealth is held in residential property – which is one of the many reasons that government, the banks and the RBA will guard against any property price crash.

While we deal with more interest rate pain and some softening of prices for now, it is the expectation of most experts that the property market will bounce back.

The housing market is too important to fail. State governments in particular depend heavily on taxation revenue from property in the form of stamp duty and land tax. In NSW, budgeted property revenue of $16.5 billion accounts for 41.6 per cent of the state’s total taxation revenue.

And also consider the fact there is an under supply of housing due to the problems for the construction with building supplies and finding workers.

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