Falling property prices have come at the worst possible time for Alex Hogan and his partner. They are now weighing up whether they can afford to have another child. Locked out of the established housing market, the Queensland couple resorted to buying a block of land to build a family home.
Fast-rising construction costs are now limiting their options and the anticipated value of their finished home is sliding, as rising interest rates and the government’s property tax reforms drag down property prices. Yet Hogan wants the government to go even further in tackling the housing affordability crisis. Although falling prices are frustrating many property owners, and price falls leave Labor vulnerable to political attacks, there are some homeowners willing to accept lower valuations in order to make housing more accessible for others.
Hogan is among several recent property buyers Guardian Australia spoke to who is prepared to absorb the fallout if it helps close the growing divide between forever renters and their landlords. The government’s critics have blamed the downturn on Labor’s May budget reforms, which included getting rid of negative gearing for new investors, excluding new builds. Prices around Australia have fallen 3.6% from their peak earlier this year, according to Cotality data, led by steep declines in Sydney.
The most expensive markets are falling the most, in a sign interest rates are a dominant cause. Falls of more than 10% have been forecast by some analysts as elevated inflation makes a fourth rate hike more likely in coming months. Most long-term home owners have enjoyed years of growth, which has included a 26% price surge in just the three years to March.
Newer buyers who missed the boom are most affected by the recent weakness. Eibhlinn Cassidy bought a Melbourne apartment two years ago. They know loan repayments could spike when they refinance next year if the value of the apartment falls.
Yet the 30-year-old junior doctor is stoic about the downturn if it makes housing more affordable because they remember the constant anxiety of grappling with soaring rents, weak tenant rights and losing bonds. Prices are expected to rise again once the RBA starts cutting interest rates, likely in 2028. Experts expect the current downturn and the loss of those settings to push the Australian mentality back in the other direction – in part because those who played by the old rules could soon find themselves in financial pain.
Extract — continue reading at the source.
