Anyone reading the financial news in Australia over the last week—since the Liberal coalition won the Fedral elections—could not have helped noticing all the various articles about how it has ‘saved’ the property market and prices are ticking back upwards. In the Weekend Australian Business section there are headlines like “The buyers are back” and “Election sparks ‘mini-boom’ as buyers return to housing market”.
Auction clearance rates have jumped up by 10 percent in the one week.
Now, I am trying to sell a house so I would love it if this was true. However, something tells me that the general decline in property prices is not over. I can see why the Liberal’s winning the election might help the property market. But I think it would only probably be enough to slow down the rate of falls. And maybe, at the very best, stop the general fall of the market. But I honestly do not think property prices will start to go back up again for at least two years.
Even if the Reserve Bank were to drop the cash rate to banks by 50 basis points (half of a percent), I still don’t think it would see the housing market start climbing back up. I think any reduction in housing payments that might flow through to borrowers from a drop in the cash rate would be put towards reducing other debt—especially credit card debt. Assuming that a drop in rates even freed up any funds for these borrowers.