Why are you worried? The property market won’t crash. With Dr Andrew Wilson

The property market is going to crash!

How many times have we heard that one recently?

2021 was a year like no other - prices boomed creating new records and as the value of Australia’s housing market skyrocketed, the collective wealth of homeowners jumped by over $2trillion despite the pandemic.

And sure, it’s clear that we won’t see the same level of overall price growth in 2022.

But a housing market crash?

I don’t think so, despite all the messages in the media suggesting it will occur.

If you’re a regular listener to this podcast or follow my blogs you will know that I have a weekly video chat with Dr. Andrew Wilson, Australia’s leading housing market economist.

Today’s podcast is the audio of one of my recent chats with Andrew, who has an enviable record of property market forecasts and together we share 10 reasons why we don’t think we’re heading for a property market downturn soon.

10 Reasons Why the Property Market Won’t Crash

2022 has already turned out to be a fascinating year in real estate.

Last year was unusual when we experienced a once-in-a-generation property boom and values grew strongly almost everywhere.

But now there seem to be more pessimistic forecasts about the short-term future of our housing markets than there are positive market commentators.

If you’ve been watching our regular Property Insider weekly chats you would know that we believe property values will still grow this year, but more slowly and the markets will be much more fragmented, which of course is more normal.

I don’t want to minimize the horrors of war and the obvious humanitarian disaster that is occurring in front of our eyes. Nor do I want to downplay the terrible effects of the floods in Australia or the effects that supply shortages and rising global food prices will create in the developing world, but today I’d like to concentrate on some of the good news that can easily get lost and why I’m still confident about the future of the Australian Housing markets

1. The average Australian is wealthier than ever
2. 1. It’s been suggested there is a war chest of $230 Billion in household savings
   2. Many homeowners have 30% more equity in their homes than they had 2 years ago
   3. Aussie super funds and shares portfolios are performing well
   4. Overall the total residential property market is worth close to $10 trillion and there is only $2 trillion worth of loans owing against all residential real estate.
   1. Half of all homeowners have no mortgage
   2. ANZ bank suggests 70% of their borrowers are ahead in their mortgage payments
   3. It is estimated that $1.37 billion is sitting in offset or redraw accounts which would act as a buffer
3. There’s no evidence of mortgage stress for the majority of borrowers
4. Interest rates are low and even when they rise, it will take 5 x 0.25% rises in rates to bring them back to where they were 3 years ago. And there was minimal mortgage stress then.
5. Banks have been very conservative in stress testing loan applications and most who borrowed over the last couple of years will be able to handle the interest-rate increase of 2.5% or even 3%, and those who borrowed prior to these stricter requirements being brought in would have considerable equity in their properties
   1. Interest rates rose over a 6-year period commencing in 2002 and again in 2010-11 after the GFC yet the value of well-located properties continued to increase in most years that interest rates rose.
   2. Sure, many first home buyers have extended themselves and they will be the most vulnerable, but they’d rather eat Maggi Noodles than sell up their homes.
6. Rising interest rates did not make the market fall in the past
7. There is a shortage of supply of good properties at a time that
8. Overseas Migration is going to pick up. Melbourne and Sydney will be the main beneficiaries of this.
9. The same “experts” who are currently predicting that property markets will crash in 2023 are the same ones who have made multiple incorrect Doomsday predictions over the last couple of years.
   1. Our export income will improve because of the Russian Ukrainian crisis.
   2. Our tourist income will improve now that our international borders are opening.
10. Australia’s economy is growing strongly and will continue to do so and anyone who wants a job can get a job
11. There’s a shortage of rental properties, and rents will increase strongly this year, bringing more investors back into the market.

Links and Resources:

Michael Yardney

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Dr. Andrew Wilson, Chief Economist My Housing Market

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Shownotes plus more here: Why are you worried? The property market won’t crash. With Dr Andrew Wilson

Some of our favourite quotes from the show:

“In general, they’d rather eat Maggi Noodles than sell up their home, so they’re not going to end up selling up and making the property market crash.” Michael Yardney

“To find success, sometimes you’ll have to dismiss common beliefs.” Michael Yardney

“In my mind, diversification leads to averageness.” Michael Yardney

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