It’s pretty clear that the first half of 2016 is looking like it’s going to be pretty soft. Remember, it’s possible to make money in any market. You’ve got to live by that rule. You’re the one writing your own pay-check. Not the market and some time these little soft patches can be a great chance to pick up some extra sweet deals.
So the first point to watch is wages. Wages feed directly into purchasing power and straight into prices and for some time now wages have been soft. The RBA has noted that these are particularly soft times for income growth.
So how can wages be falling and prices still rising? It just didn’t make sense. Well, the reason for that is while wages are important, they’re not the only factor.
One counter-force has been the surge in Chinese buying. Chinese money has no relationship to Australian wages growth at all. It’s totally independent. But the other thing we’ve got to remember is that the bridge between wages and house prices is credit. Because people don’t buy houses out of income. They buy houses with mortgages, paying interest.
And what we’ve had up until recently is falling interest rates, making credit cheaper. Each rate cut jacked up the multiplier on wages. And it goes to show how big a factor interest rates are even though wages can be stagnating, house prices can rise on cheaper credit.
Official rates haven’t risen, but APRA restrictions have put a serious brake on bank lending. As existing investors you’ve probably seen a little sting in your mortgage rates. Maybe only 10-20bps, but, every bit counts. That’s a big difference.
And so now we’re in to second point – credit growth. And the truth is that credit growth is slowing. With tighter bank lending standards, and a market that seems to be approaching a cyclical peak, credit growth has turned a corner and that means house price growth will slow as well. It doesn’t mean it will fall. We’re a ways off that. But credit growth is pointing to softer market conditions that seems clear.
Anyway, the point is that the market, over all, is stepping down a gear. 2016 is going to be a lot less hectic than 2014 or 2015. Time is such a thing. Of course that doesn’t mean there’s no opportunities to be found. In fact, by March there could be even more awesome opportunities available than there are now.
This is a market for keeping your eyes open, and to push your deals harder. It’s a buyer’s market, and that’s always the best time to buy. Get skilled up, stay focused, and watch out the market in 2016.
Source: http://knowledgesource.com.au/category/property-investing By Jon Giaan