Globally, nations are experiencing economic crises that could define a generation. Not only is Australia dealing with a rampant inflationary crisis, but Europe and the US are also encountering serious difficulties with regard to rising costs. Not only this, but stock markets are experiencing unusual instability as recession fears deepen globally.
The housing market is usually a bastion of stability amidst economic uncertainty, with property values prone to consistent growth over time. This remains true for the most part, but recent economic events have suggested that even house prices are not safe from the tough period to follow for Australians. What is the outlook for house prices – and what can people do to mitigate the impact of falling prices?
The Housing Market
The housing market in Australia has been strong for the most part in 2022, with consistent growth month-on-month. However, recent figures indicate that property prices are heading for a downward spiral on a nationwide level.
Though declines in property value have been well-documented and brief in the history of the property market, this decline could be different – with leading economists indicating that the decline comes at the end of a “long-term upswing”, suggesting an extended period of value downturn and a much slower process of value recovery.
Naturally, this is somewhat devastating news for both homeowners and professionals in the property market. Not only is value being actively removed from individual investments, but also the future earning power of new developments and shrewd wealth investments significantly mitigated.
Reacting to the Market
Homeowners with long-term plans for living in their property have relatively little to worry about, as value is extremely likely to return in the long term. However, the news is unwelcomed for those who use property as an investment vehicle – necessitating the exploration of alternatives.
For investors with limited access to capital – perhaps as a result of riding out the property market downturn – CFD trading enables speculation on the movements of stocks, as opposed to the trading of the assets and stocks themselves. This can be a lucrative way to profit from positions without making a large initial investment and thus, position yourself on the other side of the market instead of being on the receiving end.
Property value decline is also being met with rising rates of interest, which increase the cost of borrowing but simultaneously increase the value of utilising savings accounts. Shrewdly choosing institutions with which to bank can allow investors to passively accrue value at a meaningful rate.
What the Future Holds
The property market is near guaranteed to level out in the long term, as indicated by the economists interviewed regarding current price movements. However, the length of time between current decline and future gains is hard to predict, leaving many investors hanging in the balance in 2023. With even more cash rate rises on the way, it may be a difficult year for investors and budding homeowners alike.
