Well, it's certainly an interesting market, BW, and a tad unpredictable to read, given the binary nature of things. On one hand we've got circa $430 Billion in fixed loans converting to variable between May 2023 and March 2024, which includes interest only loans the banks are now reluctant to rollover - all at a much higher IR and rising through 2023 with a possible terminal cash rate of circa 5%/6%. So, let's say a mortgage rate of circa 7%/8% as an end result (keeping in mind that these are rubbery figures). In any man's language the above dynamic will cause some extreme pain for the first home buyers in the outer suburbs and overleveraged investors. I don't think anyone can deny that.
On the flip side, there are also counterintuitive dynamics at play. Foremost, is the extreme housing shortage, which is laboring to keep up, which is exacerbated by rising immigration, returning expats and the return of OS students - all culminating in an unqualifiable level of demand for ownership and certainly rental accommodation, resulting in higher returns for the latter. And add to that the current low unemployment figures, which may or may not hold, given a recessionary environment followed by demand destruction that could well come into play.
The other dynamic is that the middle cohort of Baby Boomers, arguably the biggest moneyed generation, have now all but retired, and are not affected by IR rises - for the most part; so unaffected by sale/purchase dynamic, given no mortgage required.
The upshot is, that we could/might see 'A tale of two cities' where the outer suburbs dominated by first home buyers over the last two years are crushed by much lower prices and distressed sales, while the inner metro areas dominated by Baby Boomers may see a milder effect of the accelerating downturn.
And like all market movements, we can only speculate, given the known knowns and the unknowns, which may or may not come into play.
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