There is no doubt over the past few months, home price growth has slowed, and with the recent cash rate increase and lenders expecting more rate increases in the coming year, many are predicting house prices to plummet.

Real estate prices inevitably has peaks and troughs for lots of different reasons, and while higher interest rates will affect price growth, Newcastle and the surrounds are generally holding their own at the moment.

Having been in real estate for nearly 50 years, we have an understanding of what causes falls to happen, and what cushions them; we do expect the house-price rise curve to flatten, but the fall in house prices may not be as dramatic as initially predicted.

Here are three reasons why:

Banking watchdog tightened the mortgage rules

Borrowers have to go through a stringent process to borrow money, and with good reason; the last thing any home owner wants is to be in a situation where they can’t make the mortgage repayments, which results in a repossession and a forced sale.

To help reduce the risk of property owners being unable to afford their loan repayments, Australian lenders do have responsible lending obligations.

For instance, towards the end of last year, the Australian Prudential Regulation Authority (APRA) increased the minimum interest rate buffer it expects banks to use when assessing a person’s ‘serviceability’; the minimum rate rose from 2.5 % to 3.0 % above the loan product rate.

In other words, banks and lenders cannot now provide a home loan to a person until they are satisfied the borrower can still afford the repayments on a rate 3.0 % higher than the current product’s rate.

This means homeowners will have the financial room to accommodate the recent increase in rates, and the likelihood of the market being flooded with repossessed properties requiring a quick and cheap sale is reduced.

Strong employment

At time of writing, the latest ABS Labour Force figures (Seasonally adjusted estimates for March, realised 14 April 2022) for Australia show an unemployment rate of just 4%.

Again, this is good news; it means people are earning and can meet their financial obligations, and potentially there is the opportunity for wages increases.

More savings

Survey data suggest that households have maintained high savings buffers into the second half of last year aside according to the Reserve Bank of Australia (RBA).

This means mortgaged homeowners have a buffer to limit the possibility of mortgage stress, and once again, the risk of repossessed cheaper properties coming onto the market is reduced.

We are still achieving good prices for our clients, even with the rate rise , so if you’re thinking of moving, it doesn’t hurt to make some general enquiries about what you can realistically expect to get from your house.

Get in touch with us and we’ll come round and give you a free, independent and non-obligatory quote. We can also suggest low-cost ways to improve your property.

With the right help, selling a house needn’t be a nightmare, and our aim is to make your property experience as smooth and hassle-free as possible.

Call in and see us in the Cardiff office or give us a call on 02 4954 8833. Or send us an email to: mail@apnewcastle.com.au.

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