Yeah, the good folk on this thread should know about this 'coconut' (me). I'm down in 6 of the 8 stocks I've bought into since November. In early April, they were up over 25%. Now, a couple of months on, they're down over 30%. That's the nature of the market we're in. I'll tell you a secret though... this 'coconut' has made over 60 bags on a stock he held for a bit over three years... In the first 6 months after he bought it, he was getting 'slaughtered' on that one too.
Anyway, this thread is about property. So, as the moral of the story above seems to have been lost on some of you, I'll put it to you differently. The fate of the property market depends on how persistent inflation remains and how high (and how quickly) interest rates have to go up in this cycle, to bring it back down to under 3%.
It's a given that interest rates will go up again in July, and that move will push the cash rate to over 1%. Even if the RBA pauses there, and raises no more, give the new rates 9 months to take effect on the loan market, so by the end of the first quarter of 2023, there will be a 10-20% drop in prices depending on the city/region and suburb.
However, the likelihood is that inflation won't be tamed after just one more rate rise. Most economists say it'll likely take several hikes and a cash rate of at least 2.5-3% to haul it back (4%-plus if you believe the bond markets). That, I'm afraid, means much bigger than 10-20% drops in house prices. Don't take my word for it. I'm just a coconut. Read up on Christopher Joye, who was one of the few who predicted house prices would go up, not down during the pandemic, after the RBA announced its $180B term funding facility. He knew the massive liquidity pump would cause a boom in risk assets (property included). He now says if rates hit 2%, house prices will fall over 30%. And that's the softened headline in the article - the modelling he's used actually predicts bigger falls, as much as 40%. But hey, maybe he's a coconut too...?
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