YouTube investor Hamish Hodder predicting Australia’s housing market is about to collapse
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Popular financial commentator Scott Pape has warned that Australian house prices have “dropped one of the fastest ever.”
Pape – the bestselling author through his money guru alter ego The Barefoot Investor – said in a column published Monday that he “wouldn’t be surprised” if real estate prices fell the 30 percent gain achieved during the Covid period.
According to real estate research firm CoreLogic, Australian house prices rose on average by 24.6 percent between March 2020 and February 2022 due to “low interest rates, high family savings, government subsidies and a sharp decline in housing supply.”
But since May, the Reserve Bank of Australia has aggressively raised interest rates from a record low to 2.60 percent in a bid to combat the highest inflation rate since 1990.
Scott Pape (pictured), known for his alter ego The Barefoot Investor, said he “wouldn’t be surprised” if house prices fell the 30 percent gains they’ve made since 2020.
Consecutive monthly increases have added an additional $715 per month to mortgage payments for the average borrower.
The median house price in Australia is on a strong downward trend, largely due to interest rate hikes, falling 1.6 percent in August and another 1.4 percent in September.
Since the beginning of the year, the median home price has fallen 4.5 percent, data from CoreLogic shows.
Consecutive monthly declines in home values between April and August have knocked more than $114,000 off the average Sydney home price – equivalent to $927 a day.
In Melbourne, the average house price fell 4.4 percent between April and August, equivalent to $51,000, or $415 per day.
As further RBA rate hikes are expected, some economists predict that up to 25 percent of the average house price could be cut once the hikes take full effect.
“I wouldn’t be surprised if house prices eventually surrender the 30 percent gain they made during the Covid period,” Pape wrote in his column on Monday. The Australian Business Network.
‘That’s big. It’s the kind of shock to the system that drives an economy into recession,” he added.
‘A lot will depend on how far the RBA runs’ [interest rates]. But the problem is, the RBA has proven to be just as accurate in calling interest rates, which they have set, as my youngest boy can pee standing up.”
RBA interest rate hikes have caused home prices to fall nationwide as mortgage payments rise (file image)
The RBA’s latest rise of 0.25 percentage point, the sixth consecutive rate hike, was more moderate than previous increases.
The unexpected shift towards a slower pace of tightening has prompted some economists to revise their forecasts for the peak spot interest rate.
ANZ economists expect the spot rate to be 25 basis points higher than the 3.35 percent previously forecast to 3.6 percent in May next year.
The bank’s economists believe the RBA’s decision to downgrade to 25 basis points will extend the rate hike cycle and may force the bank to raise cash rates even higher than expected.
“The slower pace of rate hikes increases the risk that rates will have to move higher than previously expected as demand remains too strong and sentiment is initially boosted by the moderation of the RBA,” said ANZ economist David Plank.