Australian property values are softening as rising interest rates and inflation take their toll. However, the cyclical nature of the property market means there will be plenty of opportunities for SMSF investors.
The last time we saw significant falls in house prices was way back in the early stages of the pandemic in 2020. Fuelled by ‘peak panic’ in markets – with economists predicting substantial and extended economic pain for our national economy – home values dropped by nearly 10 per cent across a seven month period. Once the economic outlook became clearer, and against the backdrop of the ‘whatever it takes’ attitude of our governments and regulators, housing prices quickly returned to pre-pandemic levels, with annual dwelling values up 4.3% over the past five years.
The cyclical nature of the Australian property market means there will be plenty of opportunities for SMSF investors, who are largely insulated from any broader property price falls for the following five reasons:
With borders reopening amid record-low unemployment and calls by business for skilled migration, demand is likely to be supported. And when it comes to interest rates, we agree with the consensus view that the terminal cash rate will peak between 2.5% and 3.25%.
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La Trobe Financial Services Pty Limited ACN 006 479 527 Australian Credit Licence 392385.
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