In recent times in breaking news for COMPASS lending & finance, I have been discussing the tightening of access to consumer credit which has been occurring for several years now as a result of the Australian Government introducing additional prudential guidelines, which placed increased liquidity & capital adequacy ratios on lending institutions.
On top of that, there is increasing pressure on Australian banks in regard to their cost of borrowing money from offshore sources, particularly the USA as that country reduces money flows. This increased cost inevitably gets passed on to the consumer through higher loan interest rates.
Another impact of rising interest rates & tighter credit is on residential property prices . If loan demand slows because of interest rate pressures or tighter lending guidelines, then that tends to place downward pressures on property prices.
On the 5th April I received a residential property market update from an industry specialist. In that market update they showed the current ‘Property Clock’. The ‘Property Clock’ reflects where certain regions are in respect to the price cycle . At noon the prices have peaked. At 3 o’clock they are in decline. At 6 o’clock they are at the declined stage & at 9 o’clock they are in growth/rising position.
In that April 2018 issue of the property report these were the regions that they noted as reflecting a current ‘peak’ price position:-
Central Coast
Coffs Harbour
Mid North Coast
Newcastle
Gold Coast
Melbourne
These are the regions that reflected a bottom or ‘declined’ position :-
Adelaide
Adelaide Hills
Albury
Alice Springs
Barossa Valley
Bundaberg
Cairns
Darwin
Gladstone
Iron Triangle
Mackay
Rockhampton
Toowoomba
Now of course there are a number of other factors that can impact on property prices in certain locations, that also relate to supply & demand conditions & they can be as an example, the undertaking of major infrastructure works relating to transport or communication/services etc. Regardless the takeaway from this is that like any product or service, property has a cycle & we need to be mindful of that.