Whilst not the Chinese curse it has been thought to be, this quote neatly sums up the dilemma we currently face in not just Australia, but the world today. With war, blockades, weaponization of currency and commodities and climbing inflation, we are all starting to feel the effects in our daily lives.
How will this affect property prices? The only real question currently is how much prices will soften and for how long. Stagflation (inflation without growth) and recession are now being considered as genuine possibilities. Rates will rise relatively quickly. Again, the only debate will be how high. Consensus is currently to between 2.5 to 3.5% plus the bank margins (typically 2-2.5%).
So, prices will drift downwards, and the rate of fall will likely increase as the year concludes. The degree of pain felt by consumers to fuel and energy costs, along with simple groceries, will dictate the speed of the decline. But it won’t be all negative forces. The Reserve Bank will exercise great caution on rates, the Government will interfere with the natural market to slow price increases (whilst blaming the previous Gov for everything that goes wrong) and wages will jump.
There will still be pain though. And prices will fall. Nobody can genuinely say by how much, but if it was less than 10% from here, we could consider that we have dodged a bullet. More than 15% and we will have probably slipped to the edge of a recession.
Better opportunities will be created for first home buyers, and investors will be attracted by the increase in rents. The poorly thought through rental laws introduced last year will continue to see an exodus of long-term rental providers. Supply will likely continue to drop as fewer investors buy than sell.
Of course, there will eventually be another Black Swan event that nobody sees coming. It will dramatically influence the market and will be unpredictable. We live in interesting times.