Ep10: What's going on in the housing market for 2024?

Batten down the hatches because you're welcome to the Home Loan Insider.

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I'm Max Lending, your industry insider, and we're lifting the lid on the finance market, guiding you on how to cut through the jargon, manage your finances and get investing into the property market.

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Welcome back, my fellow insiders.

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Podcast numbers are looking great.

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So thank you very much for listening.

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And also it was great to see the fantastic download numbers from our budgeting calculator that's available on our website.

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Oh, now that I've hit you with all the good news, it's time for me to lay down the bad news and that's the economy.

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It's rough out there at the moment.

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There's definitely A2 speed economy happening.

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That's the haves and the have nots.

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Which side of the fence do you sit on?

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But the main question on everyone's lips is what the hell is going on with the housing market in 2024?

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And here I am about to lay down some gold Nuggets for you.

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So you know the drill.

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Are you in your comfy undies?

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Do you have your cup of coffee?

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Well, that's great to hear because it's time to get stuck into it.

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Average interest rates have been at a decade high.

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Actually, they have not been this high since 2011, meaning it's been 13 years since the cash rate's been at 4.35%.

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You know what?

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Let's take a step down memory lane and have a look at what the average loan size was back in 2011 compared to today.

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This is gonna make you so depressed.

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All right?

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So in 2011 in Australia, the average home loan size was 300 and forty-eight $1000 and today it's 600 and twenty-four 1000.

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That's 1.8 times the amount.

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Let's let's go through some states, some key States and let's see what the difference is.

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Let's take NSW 2011.

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300 and eighty-two 1000 was your average loan size today 700 and eighty-five 1000 and that's probably buying you some shack in Victoria 350,000 and today 613,000.

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So that's on average that's 1.7 times.

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What about our friends in SA?

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Just a a shy little 200 and eighty-four 1000 in 2011 and today.

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Still reasonable.

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It's 519,000 WA.

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Big jump there, 300 and twenty-nine to 509.

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Who else?

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Let's go.

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Tasmania.

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Tiny little 200 and forty-five 1000 little cute amount in 2011 for a home loan.

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And today, look, it's still still a little, but it's a big increase, 1.8 times more, 400 and sixty-two 1000.

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Sorry, let's not forget our friends in Queensland.

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In 2011 it was 328,000 and today it's 572,000.

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And as we know, the reason for the increase in the home loan is mainly because the increase in the house prices.

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Obviously there's a host of reasons why house prices have gone up from inflation to immigration, blah blah blah could list goes on.

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But that's not what's interesting.

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What is interesting is that the wages aren't keeping pace.

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And we know that because there is no way $100,000 is buying you the same amount in terms of serviceability as it was back then.

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Let's talk about the feels.

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I speak with many people from banks, mortgage brokers and the actual customer.

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And to be honest, the feeling is fairly glum out there.

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This is because serviceability is low and general inquiries coming in are also down.

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The inquiries that do come in though, people that are looking to purchase a refinance.

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They can't service.

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Of course, there's always a level of customer that earns great income and can service anything.

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But for the average person, this year may just be a stabilisation year for you.

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What do I mean by that?

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Well, if you're finding it hard to service a loan, you may need to think about sitting back and use this time wisely.

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Start by saving and building up your cash reserves.

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Or even doing the dreaded changing the region and look further out for a house that's a bit more affordable.

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Well, honestly, if you can't service, maybe you need to even look for a new job, one that pays better.

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Let's tell it like it is though.

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House prices are not going to go backwards waiting for you to get a deposit.

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But hey, don't listen to me.

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You do you.

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It seems to be working right.

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Just know that that rate cut that everyone's waiting for, it's not happening anytime soon.

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We'll go through my reasoning in a second, but let's keep talking about the glum stuff that's happening.

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Housing refinances have decreased from 60% of mortgage transactions to a normal 30% of all mortgage transactions.

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What does this mean?

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It means that there was 800,000 mortgages that were coming off their fixed rates across 2022 and 2023.

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They were all coming off those ultra low 2%, you know, 1% rates and they came onto or rolled across onto a 7% rate.

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So the clients that were going to refinance have already done so and there's around about 100,000 of these ultra low mortgages left to refinance, but majority of them have already been done.

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There's a term in the industry called the mortgage prisoner.

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This is when a customer is stuck and they cannot refinance their loan.

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This is because you have to show the potential bank, the bank that you actually want to refinance to, that you can service the loan on the current rate.

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Lus a three buffer O in.

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In most cases, you need to show that you can service alone at 9.5%, which most people can't.

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There's also a massive wave of increased migration coming into Australia.

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This will place pressure on prices because you're going to have to house all of these people.

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Australian government want to bring in close to 200,000 more migrants this year alone.

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This is going to cause the flow-on effects, increased living costs, more competition for rentals.

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We're currently had a 1% vacancy rate at the moment for the rental market.

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That is insane.

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1% vacancy rate.

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If you need motivation to save harder to purchase your own place, then that statistical loan should get you going.

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There is no way in hell that I would want to be a renter when there's only a 1% vacancy rate.

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The RBA governor, Michelle Bullock, has indicated that the RBA are Terminator determined.

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to getting the inflation rate down to 2 to 3%.

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It's currently sitting at 4.1%.

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So everyone out there saying that there's going to be a rate cut to ease all these pressures this year are mentally challenged.

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When did they say that they were going to cut rates when inflation was at 4%?

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When did they say that?

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They didn't.

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Nonetheless, unemployment rate is only at 3.8%.

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You're dreaming if you think they're going to cut rates even when the cash rate's between 2 to 30%.

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If the economy is going well, why would they cut rates to cause an inflationary effect?

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And if you tell me it's because the government's going to force it, well, guess what?

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The RBA is independent of the government, even if they want to buy votes.

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What's more likely that's going to happen this year is that the banks are going to start fighting amongst themselves for business.

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I'm not saying cash back offers or any of that stuff to entice you like Flybuys points.

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I'm talking about business that is in that 80% bracket.

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Good quality business.

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They'll be dropping their margins to get the clients to refinance.

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The average interest rate at the moment is around about 6.5% thereabouts.

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Banks are going to need to entice that customer to come across.

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You'll start to see rates with A5 in front of it.

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A high 5 interest rate will most likely be enough to motivate the customers to do so.

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Now, because of the slowdown in the purchase market, banks are starting to realise that it's easier to retain their existing business and constantly search for new business.

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They're offering clients very sharp rates to stay or even matching the competition's rate.

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Watch this space.

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This is when.

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You'll really understand why they call me the home loan insider.

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So what can you do during this time of doom and gloom?

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There's always a few things.

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You can look at rentvesting, look at properties in other states to purchase as an investment.

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The other states might actually have a cheaper investment market, especially coming from Sydney or Melbourne.

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You can save, or you can start planning for 2025.

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Use this time wisely.

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And budget.

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If you need help with budgeting, you can download the free budgeting calculator from our website.

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2024 is a year to take stock and set out some plans for yourself.

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Based on my listener stats, a lot of you were not actually around or working during the GFC.

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So let me give you a quick overview of what it was like.

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There was mass layoffs, the stock market crashed, the housing market didn't drop or crash like it did in America, but it did slow here in Australia.

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But.

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That was a time when you can draw a line in the sand and say that was a down period for the Australian economy.

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Similar to this year, after two years we got through it and then there was 8 years of pure growth, business wise, house price wise and wage growth wise.

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So if there's anything that you need to learn from the past, it's this.

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We are on the brink of a downturn.

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Just look at the news.

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A housing developer goes bust, what, every second week?

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Godfrey's has just gone into liquidation.

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F45 gyms that represent discretionary spending has gone into liquidation.

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Also, when a gym or Pilates studio that costs 60 to $100 a week to go to, guess what?

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They're the first thing to get cut out of people's budget before your Netflix subscription.

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That business model only works in a strong economy, which we are not currently in.

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There will be some pain.

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Unfortunately, that has to happen, and that's what the RBA even said.

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The pain will usually last, though, one to two years, and then it's pure growth for the next 5 to 8 years.

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So don't put your head in the sand.

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Use this time wisely.

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I do not know how many times I have to say this.

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It's time to get your game plan ready.

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Oh geez, well, I just listened back to that episode.

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Didn't mean to scare you out there, but I'm not wrong.

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Thank you guys for listening.

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As always, click follow to stay up to date for our next episode.

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You stay classy and I'll see you at the next one.

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Details available in the show notes.

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Any opinions and views expressed in this program are just that opinions.

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All information is general in nature and should not be seen as financial, economic, legal, investment, accounting or tax advice.

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This program makes no representation or warranty as to the accuracy or completeness of any information contained in this program.

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You should consult a professional advisor in relation to your own personal circumstances.