Is there going to be a rush of new stock on the market?
So the RBA paused rates on Tuesday. Phew.
You can hear a collective sigh of relief around the country.
I think we’re very close to the peak now, but I’m not convinced we’re completely done. There’s a good chance there’s another one or two in the pipeline.
In normal times, that would be enough to rule out any futher price declines in the property market, and feel pretty certain that it will be one-way traffic north from here.
But these are still not normal times.
Because there’s a significant fixed rate reset to get through yet.
A lot of borrowers took out ultra-cheap fixed rate loans during Covid, and these loans are now in the processing of resetting at current (much higher) rates.
And the amount of loans in the reset is pretty substantial.
Some people argue that this will lead to a lot of forced selling. Veteran real estate agent Tom Panos even reckons it will create a “blitz” of new stock on the market, which could potentially tank prices.
In his latest Youtube post he said,
“It’s getting really concerning and the reason why is we now know this was the Tipping Point where people that are coming off fixed rates and going on to variable”.
“For the record, most of those people are coming on between July and September, and what I want to let you know is that the reason why it’s concerning is that RP data is saying there is a record number of people getting CMAs [comparative market analysis] done at the moment”.
“CMAs are the step one before a home comes on the market. We know we’re about to have the biggest blitz of stock hitting the market in many years in the next few months”.
“The reason I’m worried is some of these people are going to be the ones that simply can’t afford six percent”.
“Their repayments have more than doubled. These people are going to put their homes on the market and what it’s going to do is it’s going to drag the value of your property down as well if you’re on the market at the same time”.
When a real estate agent says it’s an urgent time to sell (and therefore list with a real estate agent), you do need to take it with a grain of salt. But what he says about CMAs is interesting.
I’m personally not expecting a ‘blitz’, not unless there’s a massive ramp up in unemployment.
But I am alert to the possibility that the next six months or so could be a little bumpier than a lot of experts are predicting.
In the medium term, the fundamentals (big demand, very constrained supply) will drive the market decisively into the next boom.
But there’s probably a little bit of turbulence to navigate between here and there.