So far property prices have fallen 5.8 per cent in Melbourne since its peak in November 2017 and according to latest figures this may be exacerbated by changes in the lending market. There has been an increase in Banks and lenders steadily increasing interest rates independently of the reserve bank with ING announcing a 10 basis point hike on rates for new borrowers and the Teachers Mutual Bank hitting all its customers with a 20 basis point increase.
There is no doubt that this is having an effect on what is being seen in the property market. Along with rate increasing borrowers are now being hit with tougher lending criteria with banks cracking down on riskier loans in the wake of banking royal commission again dampening house prices.
The additional pressure on interest rates which are in part influences by conditions in the USA economy will reduce annual consumption growth which in turn will reduce annual GDP growth for the next two to three years which will then also drive values down not only of properties but also all assets in general.
However, do not despair, especially if you are able to hang tight and wait it out. Despite the fact that we have been experiencing lower inflationary pressures in the last few years, this is not likely to continue in the long run. As government debt continues to rise, infrastructure spending is going through the roof, population growth is following suit and will eventually put upward pressure on inflation. We all know what will happen then.