For me the number 1 factor affecting the housing market is money supply.
It is what holds prices up & enables them to run hard or contract. Historically it has been very easy for investors in this country due to loose banking policy, overseas investors, immigration & the move from 1 wage per household to 2.
These are some of the questions that need to be considered IMO:
- Where will the money supply come from in the future?
- Will foreign investment continue the way it always has?
- Will the banks lend freely or will they continue to tighten servicing?
- Will incomes continue to rise, including rent & how will banks treat rent in the future?
- How will banks react to a rate change by the RBA?
- How much margin will the banks try & clawback before they are satisified?
I also feel there are also some political things to consider:
When the government talks about possibly removing negative gearing (as an example), banks react & factor that into their risk profile, even if nothing eventuates.
What will happen to house prices if taxes are increased for foreign investors & demand fades?
The thing I find most concerning, is banks are raising rates outside of the reserve bank, but according to the RBA analysis, they haven't actually gained much NIM back (Net Interest Margin) & are still close to historical lows. NIM is the reason banks are raising rates, but if they aren't clawing anything back, then there could still be plenty of rises to come as its still at historical lows, making them nervous.
I haven't done my own research on this, but it does suggest banks are relying more on overseas funding again (or banks are having to pay much more for deposits - unlikely); as deposits are a far cheaper cost of funds:
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