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Ben Kingsley Blog post by Ben Kingsley

The Affordability Question

Most people will agree it has done its job of getting more home buyers into the market and the follow on effect will be a mini-construction boom, once the land titles are registered and the new homes are under construction.

Couple this with record low interest rates and it’s only natural that a spike in sales and demand would lead to price value growth in property (I’ve been saying this all year). Given the recent Auction clearance rates, it appears the investor and owner occupier players are both in the game at the moment. With interest rates looking to move north in the not too distant future, the property affordability word will start to come back into the press.

Sure it’s easy to afford repayments when interest rates are at 5% on your $400,000 mortgage, but it’s when rates get to 7% & 8%, you start to see the dangers in some of the property values for properties located in the mortgage belt. The folk in these locations are traditionally lower income earners as they are younger and less experienced in the workforce. It will be the combination of resolve and resilience of the localised masses in each of these mortgage hotspots that will test the market value of their properties in the short to medium term. Their only ray of light will be the speed, or lack of it (hopefully), in which interest rates execrate to these longer term averages.

For me, the property market at this point represents too much risk. Give me a localised market with professionally educated and qualified locals, stable employment and strong prospects for wage increases and values should hold and grow over the longer term.

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