What Constitutes a Market Crash?
With so much talk of an inevitable housing market crash, it’s hard not to wonder whether you should be assessing your investments or pausing on that next property purchase.
While there is plenty of commentary out there to support either side of the argument, the better question to ask yourself is what constitutes a housing market crash?
The flattening of house prices is not the same as a market crash.
A few key points we think are worth noting;
The Reserve Bank wants to kill inflation, but not at any price it isn’t going to deliberately cause the Auckland property market to collapse.
Do not confuse cyclic behaviour for a crashing market. Slowdowns in house price growth are a regular feature of the housing market.
Forecasts are just forecasts, we all proved that two years ago when predicting prices would fall 10% or so. Did they?
Mortgages have been tested already on their ability to service rates of 6.5% and higher.
The government will not make extra moves against investors that would risk house prices falling firmly heading into next year’s general election.
Worst-case scenario, property prices stabilise. While demand may slip away it opens up more options for active investors in the market.
Inspired by :tony- alexander economist