Tough times: Panic sales warning as housing market tipped to plunge
Homeowners needed to prepare for a new round of housing price falls and “panicky” distressed sales following a 12th hike in interest rates and expectations of more to come, according to SQM Research.
The housing market could be heading for a second downturn (Pic: Ray White)
The company, which charts the real estate market, said distressed sales were currently very low but “we can now expect distressed activity to rise based on a new round of forced and panicky selling activity”.
Managing director Louis Christopher said he expected this to start in the second half of the year and it would be more certain if unemployment rose to 5 per cent.
“Naturally, the higher the unemployment rate, the more forced selling we will see,” he said.
“So, in our view, market participants need to be prepared for a new round of housing price falls starting in the second half of 2023.”
The Reserve Bank Governor, Dr Philip Lowe, yesterday cited the reawakening of the housing market in his reasons for the bank’s decision to lift the cash rate to 4.1 per cent.
Brisbane house prices rose by 1.4 per cent in May and home builder Tamawood said it had been swamped with inquiries.
Christopher said the spring selling season, normally the busiest time for the industry, would be a tough one for sellers.
“Buyers need to be very cautious in this environment, especially for regional areas which were already weakening, but I doubt out larger cities will be spared much given the massive mortgage debts outstanding.”
He said there were too many X-factors at play, including an emergency rate cut if the RBA realised it had gone too hard.
“Never forget in all this, that once confidence really cracks it can stay that way, even with rate cuts. The recession of 1990 to 1992 taught us that confidence in the economy (and) housing can take a long time to recover,” he said.
Economists have tipped that another rate hike was likely to occur soon. Westpac believed it could be next month and potentially another in August.
Lowe told a Morgan Stanley function in Sydney today that while the rate hikes were hurting a section of the community, the damage from continued inflation would be far wider and longer lasting.
“It is certainly true that if the board had not lifted interest rates has it has done, some households would have avoided, for a short period the financial pressures that come with higher mortgage rates.
“But this short-term gain would have been at a much higher medium term cost. If we had not tightened monetary policy, the cost of living would be higher for longer.”