It would be a great shame if the current weakness in house prices does not see those groups previously frozen out of the housing market step up and buy a house to live in.
Whether it is in Sydney, Melbourne, Perth, Darwin, Canberra, Brisbane, Adelaide or regional Australia, housing affordability is improving rapidly with prices generally lower, mortgage interest rates remarkably low and competitive, and wages growth edging up in a steady if not spectacular way. Sure, saving that deposit for a house is still hard and the banks and other financial institutions are making it a bit more difficult to get the loan you need to buy your house.
But for many reasons, getting into the housing market now or in the next 12 months to buy your house to live in will set you on course for a life of fulfilment and financial security.
I want to set the scene with a few definitions – when I say “houses” and “house prices”, I am referring to all dwellings – that is free standing houses, units, townhouses and apartments. It is a generic term. And to make it clear, I am suggesting buying a house for you to live in, not to invest in, which is an entirely different kettle of fish.
Having been the only economist to correctly anticipate an interest rate cut from the RBA when close to 50bps of interest rate hikes were priced in to the market last year (See Bloomberg 17 August 2018), I have agonised over the exact months the cuts would be delivered and then how many rate cuts would be needed to reflate the economy.
Recently, I was of the view that the RBA would need to cut 100bps from now, to a level of 0.5%, but I did so with relatively low confidence. This is why I recommended all clients to close their long interest rate positions on 17 April 2019 (when the implied yields were 1.10% for the mid 2020 OIS; 1.35% on 3 year yields and the Aussie dollar was just over 0.7000 at the time).
Like in most good trades that were massively in the money, I left a little money on the table while I reassessed the outlook.
Since calling for interest rate cuts from the RBA, a lot of water has passed under the bridge, especially in the last few weeks.
Events mean I am changing my view on interest rates and have been placing / will be looking to implement new trades.