What’s in store for property prices

Let’s take out the crystal ball and see what’s in store for property prices.
 
Nationally, they continue to creep higher – they’re up a very respectable 6.7% this year.
 
Yet it’s also clear that the market is losing steam, especially in the tinsel-towns of Sydney and Melbourne, where there are currently more homes for sale than at any time in the past five years.
 
Why?
 
“Owners struggling with mortgages at the moment are thinking, ‘I’d better get out and take advantage of relatively high prices’,” AMP chief economist Shane Oliver was quoted in the news as saying.
 
I think that makes sense.
 
But hold your handbags!. Another expert, Louis Christopher from SQM Research, predicted this week that prices could boom 10% nationally next year if we get a rate cut (or two) early next year.
 
I also think that makes sense (especially in Perth and Brisbane, where there’s a lack of supply).
 
So the question then becomes: how likely is it that homeowners will get some ‘relief’ from high rates?
 
Well, in January economists were almost unanimous that we’d get a rate cut this year.
 
Didn’t happen.
 
And now they’re equally unanimous that we’ll get rate cuts next year.
 
Tik. Tok.
 
Perhaps that’s why Treasurer Dr Jim Chalmers describes current interest rates as being “stubbornly high”.
 
Interesting. So Jim is suggesting that interest rates are behaving much like my three-year-old does when I won’t buy him a Big M at the local Romsey IGA. He collapses on the floor and starts howling like a wolf, and then goes limp as a jellyfish when I try to pick him up.
 
Now that is stubborn.
 
So, let’s zoom out and take a look at the historical chart.

From this perspective, current rates don’t look ‘stubborn’ – or particularly high –  to me.
 
The truth is that interest rates movements are as unpredictable as my three-year-old. (Just ask the former Reserve Bank Governer Philip Lowe, who famously shanked his ‘lower for longer’ forecast … despite the fact that he was the one who set the rates!).
 
Look, despite the crazy amount of airtime we give economists and experts, history has proven that they’re actually no better at picking the longer-term movements of interest rates than a dart-throwing monkey.
 
So here’s my advice:
 
Don’t be stubborn, and don’t listen to experts (including me!). If you’re making buying or selling decisions, you need to deal with the facts in front of you.
 
And that goes for you too, Jim. I know you’re hanging out for a 10% pop in prices before the election in May, but you can’t count on it!
 
Tread Your Own Path!