My Love life and the Property Market

Graeme Salt

Back in the Middle Ages, when I had a full head of hair, there were three girls that I liked.*


I was really keen on them all and just could not decide who I wanted to be with. I spent ages dithering over the girls, such that they gave up on me and ended up with other guys.


Dithering is something that I see my mortgage clients doing on a regular basis. They are:

  • not buying just now as they are waiting for prices to drop
  • unsure whether to fix their rates or take their chances with a variable loan


I am the first to recognise that property prices can go down as well as up (but can be way less volatile than shares). But many commentators (without spruiking) are still predicting price growth this year – albeit at a lower rate than 2013. For example apartment prices are likely to grow around:


  • c5% according to Australian Property Monitors
  • 5-7.5% according to CBRE


Which means that, if someone in Sydney were to stand on the touchlines saving their pennies, the chances are that a property would be more expensive at the end of 2014 than at the start.


But even if property were to be in the red for a while, given that most of my clients are owner-occupied professionals who want to live there for many-a-year; the chances are that they will have ridden out any negative periods by the time their kids have flown the nest and it is time to sell.


Sure there are areas, such as Melbourne’s Docklands, where there is an oversupply. There, buyers risk drastic price falls. But these markets are the exception rather than the rule.


The other type of dithering I see is on interest rates. Both fixed and variable loans are at historic lows and sometimes buyers behave like kids in sweetshops – unable to choose which way to go. Here the borrower really needs to understand their own personality. They think that they are looking for the best deal. But the truth is they need to work out their appetite for risk:


  • If they want stability and predictable loan repayments, then they are best off fixing
  • If they are happy to take their chances with rates going up and down, they are best off with variable


Me, it took me ages to work out who I was and what I wanted. When I did, it was too late.


Graeme can be contacted on 02 9922 5055


*this is a blatant lie. The female sex has never really been that attracted to me.