Discounts on property available thanks to ‘distracting’ rate rises

His claims come in spite of a recent Westpac index revealing home buyer sentiment is at its lowest since Bob Hawke was prime minister.

Mr Bedingfield explained that “for long-term owners and investors, it could be the right time to buy,” especially considering “the market is pricing at a discount.” Research from Domain revealed the time to save for a deposit has been slashed over the last 12 months as home values plummeted across the country during that same period.

He noted that “the primary transmission mechanism of monetary policy is almost always via the housing market, which heightens uncertainty and risk for those looking to purchase property.”

According to the expert, metrics in March have highlighted signs the property market is bottoming out, despite CoreLogic claiming the end of the downturn will not occur until later in the year.

“Despite the strong belief that higher or lower interest rates drive the returns of residential property, the Australian residential property market’s best price gains have occurred without the influence of interest rate movements at all,” he said.

He characterised part of the market’s recent recovery, ratified by data from CoreLogic suggesting the downturn began to cool in February, as being due to “lack of available stock on [the] market.”

“FOMO [fear of missing out] has been replaced by FORA [fear of renting again],” he insisted. “Despite the cash squeeze from higher interest rates, owners are likely to hold onto their homes to avoid the current brutal national rental squeeze.”

Mr Bedingfield suggested buying in current market conditions could be a good idea for buyers, especially if it’s for a principal place of residence.

“We believe that if you can buy a building at a discount to the cost to build, then you will be the first to make money once the development cycle kicks in again,” he said. 

With population growth, spurred by returning overseas migrants and international students set to continue throughout the year, he explained, “Property prices will have to get back up to building replacement costs, as this is the only way we see developers start building again in a meaningful way.”

“As long as it is sensibly financed and it’s your principal place of residence, I think it’s one of the better places to have your capital, but you need to see it as a long-term investment,” he said.

“The reason I say principal place of residence is that it is tax-free, and it’s one of the last tax-free things you’ll have,” he stressed. “Even if you get an after-tax return on your principal place of residence of 3 per cent to 3.5 per cent per annum, you will still do better than how global equities have performed over the past 20 years.” 

As for the fixed rate mortgage cliff many are expecting to fall off, he explained despite the RBA’s “estimated 34 per cent of mortgages are currently fixed, half of which are due to reprice this year,” sounding bad.

“The statement implies 66 per cent of mortgages are floating and owners are already coping with higher rates. And despite this reality, stock on the market remains very low,” he said.