the Financial Review revealed
rising interest rate
main reasons for the house price uptick in 2020 and 2021 was a record-low interest rate.
When the RBA moved the interest rate to 0.1 per cent in 2020, people rushed to take out mortgages and were able to take out bigger loans than before. Some people could afford to pay more for a property, so the prices rose.
But it all went too far and inflation started to spike.
To lower inflation, the RBA raised the interest rate to basically discourage people from spending so much — or spending more than they could actually afford.
due to a number of factors
Michele Bullock
this La Niña season
and have been steadily falling since.
The RBA tipped in August prices would fall by 1.5 per cent per month for the rest of the year in Sydney and Melbourne and other cities and regional areas would soon follow, on Monday.
Documents released under Freedom of Information showed RBA economists were surprised by how much the property market nose-dived in the June quarter because it came well before most households would’ve actually felt the effects of the .
“We’re now anticipating housing prices to decline over the next few years. That reflects the ongoing slowing in momentum in the market and the steepening of expectations for the future path of interest rates,” an RBA economist noted in the documents.
To give you a bit of context, one of the
It seems the strategy’s working because house prices have dropped, but inflation is still too high and the cost of living is so borked that economic growth has slowed right down and a recession in Australia looks increasingly likely.
“Interest rates need to rise to ensure inflation returns to the 2 to 3 per cent band over time and inflationary expectations remain anchored,” the RBA’s deputy governor said last week.
“We still feel there is a path for us here where we can get inflation down, not go into recession, and preserve most of the gains in employment we’ve had.”
The RBA currently forecasts inflation will peak at 7.8 per cent for the December quarter, but it could get worse still.
Flooding was a major factor in Australia’s rising inflation earlier this year and with more extreme weather events on the horizon , who knows what could happen.
But in summary: plummeting house prices = good for young people, bad for homeowners and investors. But hey, at least they have roofs over their heads, they’ll be fine.
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