Last week, on Personal & Property Finance Insights: Part 1, we shared the first piece of our interview with Martin North, a data-scientist, banking and property expert. This week he talks about his predictions for the Australian Property Market.
Martin, what’s your take on the property market?
- Know your market
We are at a fundamental inflection point in the Property Market (PM). Actually it’s Markets plural. It is very different if you are an investor or occupied purchaser or where you are located, or what type of property we look at.
- Sydney, I believe there will be a slide over the next 18 months – more than people think.
- Melbourne, it will slow and correct.
- Brisbane, we can see this is already flat
- Adelaide, Hobart and ACT are actually growth markets if you are looking to invest.
- To the occupied purchaser – go careful
What the occupied purchaser has to do is calculate if they can afford their mortgage if interest rates grow 3%. Don’t count on what banks say. Just because they make you an offer does not mean you can afford it. The banks have their 20% deposit so the risk is all yours. It is not an equal sharing of risk. Interest rates will go up from this point. If you can’t afford to pay 3% more thank the offered rate now – don’t take the mortgage.
Be careful. Do your calculations. Don’t assume
- The investor – don’t go
The Property Industry, the construction sector, and even the Government are all saying prices will go up – they have a different agenda and don’t want the market to slide on their watch. But when a slide t starts, it will likely keep going, and they don’t want that to happen. Investors are 4x more likely to default or sell, according to the Bank of England in the UK, if prices go down. In Australia we have approximately 36% of mortgages in the investment sector whereas in the the UK, regulators there were worried at 16%).
As an Investor, I would say now is not a good time, as you risk losing capital.
On Personal & Property Finance Insights: Part 3, Martin North will be answering: How long until financial organisations in Australia use data to full effect?
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About Martin North
Martin North, Digital Finance Analytics founding Principal, data scientist and banking sector analyst is often quoted in the media. He curates the Digital Finance Analytics Blog, which provides commentary on our research programmes as well as covering broader industry issues. Register to get regular updates.
Digital Finance Analytics is a boutique research, analysis and consulting firm providing advisory services to clients in Australia and beyond. Services are delivered virtually using the web, blogs, social media, online conferencing and other digital means. We also produce corporate education and training videos for some of our clients.