Powered by MOMENTUM MEDIA
the adviser logo
Broker

Fluctuating property market is the norm: FBAA

by Staff reporter4 minute read
Fluctuating property market

Fluctuations in the housing market are not unusual, according to the Finance Brokers Association of Australia.

Playing down talk of a pending housing bubble burst, FBAA executive director Peter White said that the reality is that property values are cyclical.

To continue reading the rest of this article, create a free account
Already have an account? Sign in

“Every seven years or so, housing prices heat up and then cool off and the market takes corrective measures in response,” Mr White said.

“The main risk to the housing market now is the extraordinarily long low interest rate environment in Australia.

Advertisement
Advertisement

“There is no question that interest rates are going to go up, and as they hit 6 or 7 per cent, it will cause financial hardships for some borrowers.”

Mr White said that this situation doesn’t mean that existing loans were wrong at the time they were written, but rather, it’s a market movement on variable interest rates.

“That’s where the buffers being pushed out on serviceability calculations are having an effect to ensure that, as the market rises, people can still afford to service their loans,” the director continued.

“The problem doesn’t necessarily lie with the mortgage. Australia has one of the world’s highest users per capita of credit cards.”

Mr White added that people are used to having a spare 100 dollars a week to spend on consumer goods because of lower interest rates, but that buffer is disappearing.

“Stresses in the property market in the future will be caused by interest rates going up.

“People who can’t afford to service their debt will potentially start selling their assets, which will cause a property glut in the marketplace and force prices down, and that will have a negative effect as we go forward over the next 10 years or so.”

[Related: Arrears drop for second month in a row]

Fluctuating property market is the norm: FBAA
fluctuation house price
TheAdviser logo
fluctuation house price

James Mitchell

James Mitchell

AUTHOR

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

JOIN THE DISCUSSION

You need to be a member to post comments. Register for free today

MORE FROM THE ADVISER

Anja Pannek CEO PLAN

Anja Pannek named MFAA CEO

The board of the Mortgage & Finance Association of Australia (MFAA) has confirmed that Anja Pannek will be the...

READ MORE
mike felton mfaa ta jdayl5

Aggregator heads reflect on Mike Felton’s legacy

Following on the news that Mike Felton is to retire next month and step down as chief executive of the Mortgage &...

READ MORE
melanie kiely afg ta mzh8zm

AFG non-executive director steps down from board

Australian Finance Group Ltd (AFG) has advised that Melanie Kiely will be stepping down from the AFG board to...

READ MORE
magazine
Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more