Property in Feb 2023 - the positives and negatives

The national prices fall about 10 per cent from their peak – the second-largest slump in 43 years – seems to have stalled in Feb! (AFR)

 CoreLogic’s five capital city index has gone sideways.

Why?

1. Feb and March is the seasonally strongest month of the year in terms of capital gains.
2. The NSW government is allowing first-time buyers to elect not to pay any stamp duty and instead opt for an annual land tax, enhancing their upfront purchasing power.
3. The shared equity plan managed by Bendigo Bank (see link below )
4. Chinese buyers seem to have returned and a huge increase in student migration,
5. There are a shortage of properties and rentals have increased significantly 

However there is still a lot of pain on the horizon

Home buyers with big mortgages are on pain 

Why I think there will be a lot of pain  on those that have taken on huge mortgages on their own homes 

Interest rate increases have yet to hit on  one-third of all home loan borrowers are on fixed-rate products. A total of $350 billion worth of mortgage debt (close to 900,000 loans), will shift to variable rate in 2023. 

 These borrowers  will be smashed by a huge increase in their cost of capital, which in most instances will jump from about 2 per cent to 6 per cent - causing pain 

Inflation is on the rise 

We’ve been spending like it is 1999 and quickly burning through the saving  buffers.

People are spending more than they are earning!

Only 40 per cent of borrowers are less than three months ahead on their repayments. A big chunk of our society is very vulnerable indeed.

High risk premiums are lower than they should be .

The opportunity 

What does rate increase  mean for investors ?

An increase in interest rates are cushioned by tax deductions available and an increase in rentals! 

But ….Purchasing Power and serviceability has crashed  33 per cent to date. 

This could be an opportunity of sharing capital growth with those that have deposits with those that have cash flow!!

Property is still a great investment in Australia, and in my view will continue to be 

It will be interesting to see the governments experiment on partnering with those who can’t afford housing . The shared equity housing scheme 

Maybe investors should take note on what the government is doing! Personally I think shared equity is genius and a win win win for all

The shared equity housing scheme 

Great you tube explaining what it is https://youtu.be/83k8hHbCWl4