Market myths surrounding regional housing

05 July 2022

Changes in the booming property market have been hitting the headlines since the start of the pandemic.

With so many different opinions and information on the property market available' CQUniversity property experts Dr Steven Boyd and Associate Professor Garrick Small dispel the myths and misconceptions.

Auctions are the measure of a market

Auctions can be great theatre and an emotive tool to get the highest price in rising markets' but if there are few bidders available to purchase on auction terms then the bid price will be low. This could be due to other factors such as the need to secure finance or undertake building and pest inspections.

This does not necessarily mean that a market has fundamentally shifted but rather that an auction may not be the best way to sell or test the market.

If a property is unique then other methods of sale will be more effective which can be discussed with a licenced real estate agent.

One sale makes a market

During a period of uncertainty' people can feel compelled to do something' quickly. Whether that is paying too much for fear of missing out or selling too low in fear that the market is going to drop out.

With the media echoing concerns about mortgage rate increases and house prices falling' there is more anxiety and less informed decision-making.

In the past few years' an overly willing seller could still achieve a market price as there were many people hungry to buy and invest. As the market thins' someone forced to sell is less likely to achieve a market value' especially if they use the wrong approach to sell.

A forced sale is not a market sale. It is a rare occurrence of a buyer getting a benefit that prudent sellers would not provide.

The bank wants to take your home

A mortgage is a type of partnership or even marriage' but one where the bank holds the balance of power.

Having more power does not mean that they want to use it. In almost all cases a bank would prefer some interest be paid and for the loan to continue. It is an inconvenience for the bank to repossess a home' as they have steps to comply with and then they must meet the market.

Keep quiet and it'll go away

If your income position changes and you are no longer able to cover your interest payment' then homeowners must talk to the bank. The lender may assess the situation and put a hold on interest payments if they see an enduring relationship or a pathway out of the problem.

When there is a default the bank faces losing interest and the headache of repossessing a home' so they are financially incentivised to help.'

Homeowners struggle alone

Housing is the biggest investment' and the Australian housing market is way too big to fail.

The Reserve Bank of Australia (RBA) is working to reduce inflation by raising cash rates to slow spending. This does increase the cost of owning property and will see some house prices reduce.

Modest falls in house prices are not a concern to many economists and some may argue that there are affordability gains. That said' the operation of the economy and house prices are inseparable' as witnessed with the Global Financial Crisis (GFC)' as houses provide a fundamental social need.

For these reasons the greater housing market will be protected and not be abandoned the way other investments such as cryptocurrencies may be.