Australia’s property market has been absolutely red hot for the last several months. Many people are buying their first homes, others are moving into rental properties. Just like everywhere else in the world, there’s a need for housing that isn’t being filled.

But, that’s all set to change in the next few months according to the experts. Housing prices are set to come down as the cost-of-living skyrockets and inflation holds a steady high.

When Did The Boom Start & Why?

To understand why the property boom may be about to take a downturn, we must first understand how we got here.

Interest Rate Freeze

One of the most important aspects of buying a home is the mortgage. At the start of the COVID-19 pandemic, the Government of Australia, in conjunction with the Royal Bank of Australia brought in measures that helped homeowners current and future – an interest rate freeze. This meant that banks could not – for a period of time – raise the agreed-upon interest rate. And for first-time buyers, this meant that the interest rate for a home went through the floor.

Home Loan Repayment Rate Lowers

For those who had already bought a home on borrowed money, the loan repayment rate was also cut back – this allowed for first-time buyers to get their foot in the door at previously unaffordable (for many) rates. This was part of the SME Guarantee Scheme.

Injections of Government Cash

For most people, COVID-19 provided relief financially in ways that they could never have possibly imagined. The Australian Government had a number of schemes available to the general public to assist with daily life during the pandemic. Many had more money than they could shake a stick at, so did what any sensible person would – spent it in the ways they wanted to, rather than the ways they had to! They bought cars and boats and homes – for many, they finally had the money to buy their dream home.

Simply, affordability went up for Australian homes, citizens’ buying power went up and so, gradually, did housing prices – nearly doubling since 2007-2009 – this, conversely to the first part of the pandemic, drove away millennials and first-time buyers, meaning homes were once again the property of the wealthy.

What Does the Future Hold?

The future of Australia’s property boom is that it’s almost certainly going to burst. If you had planned on selling your home, you have likely waited too late to catch the gravy train of the last 12 months, where houses were selling like hotcakes for more than asking price. Unfortunately, that won’t hold for the next 12 months.

Surging inflation has forced the RBA to hike interest rates and experts are expecting that the 2.35% cash rate could be as much as 4.0% by next year. Affordability would only come after a 10-35% fall in housing prices – that is cataclysmic! Furthermore, those who’ve gone into huge amounts of debt for their homes are unlikely to see any kind reprieve whatsoever, with over $2 trillion owed in mortgage debt – a national record.

Australia’s property boom, like most of the world, is about to come to an end. It will not, according to those in-the-know ‘go out with a whimper’, instead it will be an almighty bang. Hold onto your furniture…