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HOW CAN CHEAPER HOMES BECOME HARDER TO BUY? · The Real Estate Show

• 0:00
  Speaker 1: House prices, we know, we've spoken about this on the
• 0:02
  Speaker 1: show many times before, house prices are falling across most
• 0:04
  Speaker 1: of the country, including here in Canberra. You would think
• 0:07
  Speaker 1: that that would make housing more affordable, but apparently that
• 0:10
  Speaker 1: is not the case. There's some new data that's come
• 0:13
  Speaker 1: out showing that, so we're going to find out what
• 0:16
  Speaker 1: exactly is happening there and what is the great affordability
• 0:19
  Speaker 1: magic trick. Bushy Martin from KnowHow Property Finance joins us now. Bushy,
• 0:23
  Speaker 1: good morning.
• 0:24
  Speaker 2: Good morning, guys.
• 0:25
  Speaker 1: Now, look, tell us what's happening. How can property prices
• 0:28
  Speaker 1: fall while housing becomes less affordable?
• 0:32
  Speaker 3: Well, welcome to the great Harry Houdini housing vanishing trick, guys,
• 0:35
  Speaker 3: where house prices shrink, your buying power disappears, and for
• 0:39
  Speaker 3: the grand finale, the bank pulls a declined pre-approval out
• 0:41
  Speaker 3: of your empty wallet.
• 0:43
  Speaker 2: So the answer is that house prices are only one
• 0:45
  Speaker 2: piece of the puzzle because higher interest rates are shrinking
• 0:48
  Speaker 2: our borrowing power faster than prices are falling while still
• 0:52
  Speaker 2: raising our loan repayments. And at the same time, our
• 0:54
  Speaker 2: higher living costs are attacking deposit savings like seagulls and
• 0:57
  Speaker 2: hot chips. So houses may be cheaper, but the finance
• 1:00
  Speaker 2: bridge is actually narrower, which means a cheaper house you
• 1:03
  Speaker 2: can't finance isn't more affordable. It's just a bargain sitting
• 1:06
  Speaker 2: behind the bank's locked door.
• 1:07
  Speaker 3: Okay.
• 1:08
  Speaker 2: And so off the back of what you're saying there,
• 1:10
  Speaker 2: Are we measuring affordability wrongly by focusing so heavily on
• 1:15
  Speaker 2: the actual prices? Yeah, I think we are, guys. I
• 1:19
  Speaker 2: think we're caught in sticker price syndrome where we're pricing
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  Speaker 2: the front door but ignoring the financial furniture behind us.
• 1:24
  Speaker 2: And according to a recent housing affordability report, a typical
• 1:28
  Speaker 2: $ 125, 000 household income can only afford about 12% of current homes,
• 1:32
  Speaker 2: which is down from 43% five years ago or a 75% decrease.
• 1:36
  Speaker 2: So if you're only looking at the sticker price, you're
• 1:39
  Speaker 2: not buying what I call a mortgage mullet. So short
• 1:43
  Speaker 2: and cheap at the front, but ugly and painfully expensive
• 1:45
  Speaker 2: at the back. Yeah, yeah. And that isn't a property ladder.
• 1:50
  Speaker 2: That's a fire escape with most of the rungs missing
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  Speaker 2: and a queue at the bottom, guys.
• 1:53
  Speaker 1: We shouldn't be surprised that Mullet's been worked into Bushy's chat,
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  Speaker 1: have we? It's only been a matter of time, I suppose. Now, look, Bushy,
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  Speaker 1: does all of this, you know, create an opportunity of
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  Speaker 1: sorts or is it another locked door?
• 2:08
  Speaker 2: Well, both, actually. You know, for the unprepared, it's a
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  Speaker 2: bit of a locked door, but for the finance ready,
• 2:13
  Speaker 2: it's actually a rare open window. Now, totalities revealed that
• 2:17
  Speaker 2: values have fallen across 93% of capital city suburbs through
• 2:21
  Speaker 2: the winter, which sounds scarier than a bank value of
• 2:24
  Speaker 2: a tape measure and no sense of humour, but more
• 2:26
  Speaker 2: stock and motivated vendors mean more choice, less auction elbows
• 2:30
  Speaker 2: and more negotiating room. And in our past hot market...
• 2:34
  Speaker 2: FOMO paid the seller, but in our softer market now,
• 2:36
  Speaker 2: homework pays the buyer, which means bringing a pre-approval, a
• 2:40
  Speaker 2: buffer and patience to scarce livable property with resilient demand
• 2:44
  Speaker 2: is an opportunity. So we don't need to nail the bottom,
• 2:47
  Speaker 2: just be ready while others are freezing, but the bargain
• 2:50
  Speaker 2: bin still contains broken toasters, guys, and some of them
• 2:53
  Speaker 2: are balconies. So use softer prices to buy better, not
• 2:56
  Speaker 2: simply cheaper, because if the deal needs smoke mirrors and
• 2:59
  Speaker 2: a disappearing deposit, that is isn't property magic, that's your
• 3:03
  Speaker 2: deposit doing Houdini. And unlike Harry, it doesn't come back
• 3:07
  Speaker 2: to the applause.
• 3:08
  Speaker 1: Yeah, yep, gotcha, gotcha. All right, Bushy, well, that's been
• 3:10
  Speaker 1: super interesting and we love.
• 3:12
  Speaker 2: As always.
• 3:13
  Speaker 1: Yeah, as always. You can make any topic super interesting
• 3:16
  Speaker 1: and entertaining. Thank you so much for your time and, yeah,
• 3:20
  Speaker 1: have a great weekend.
• 3:21
  Speaker 2: My pleasure, guys.
• 3:22
  Speaker 3: Cheers.
• 3:23
  Speaker 2: Keep doing the great work.
• 3:24
  Speaker 1: Thank you. Bushy Martin from KnowHow Property Finance there.