"Biggest drop in Australian property prices in 40 years"

In this week's video I talk about the 'biggest drop in Australian property prices in 40 years' as reported on a popular news site yesterday and what this means for you and your finances.

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Transcript

Hey, and welcome to Mel's Money Musings. We've had a gap for a month while I've been away overseas. If you've been playing with me on insta at more money for shoes, you would've seen my holiday fabulousness, which I loved. But now back to, uh, making sure that you finish this year really well.

And what I wanna address right off the bat is something that I've been addressing I wanna say for the last 12 months, and that is clickbait headlines. And these are ones that are particularly around property and dropping prices. Now today's headline is that it's the biggest drop in 40 years. And you might go, oh wow. And it's designed to make you do that. It's designed to make you click on that headline. And you know what? They're not, it's not, not factual in that the average drop over the last month was 1.6%, which doesn't sound like a lot.

But if that happened every single month, then sure that would the accumulative effect of that would be a lot, but I've got the article open behind me. And if we look at what that means for the last year in terms of drop for Sydney, and I'm only gonna talk Australia, but this is a global phenomenon that is happening. For the last year, the drop was minus 2.5%. In Melbourne, it was, uh, minus 2.1. In Brisbane it's plus 17.5. You guys haven't even had a drop at all. Adelaide it's plus 25. Uh, Perth it's plus 9.4. Hobart it's plus 9.8. Darwin 12.8. Canberra, 12. Combined capital cities, 4.8. Combined regional 17.5.

So can you see that two capital cities can bring down everyone's average and make that clickbait headline seem bigger? And what we are seeing now is a correction. You know, over the last two, uh, years when economists were saying in almost in accord, that we would see a drop in property prices, they rose by as much as 40% in two years. One that's not sustainable. And what we're seeing now is a retraction back to where they probably should be, in the same way that we are seeing interest rates go up to what they probably should be. We're seeing property prices level back to what they probably should be.

Will we see a continuation of that? We simply don't know. We have strong unemployment numbers in Australia. That they're incredibly low. We have wage growth, in some sectors that's quite strong. We have a rising interest rates and rising cost of living, which put pressure on people's ability to pay those what was becoming unreasonable prices.

Does that mean that you should wait? Well, the danger with that is that people were told that during COVID they waited and they missed out. So for me, if it's a long term investment, which property almost always is, then it's choosing the amount that you are willing to spend, that you are able to afford if interest rates go up by two, three, 4%. It's buying for the long term and then paying an extra one to 3% into an offset account. So that if prices move, it actually is irrelevant for you if you're continuing to be able to pay your mortgage.

The only really way that it's relevant is if you're gonna sell tomorrow, which means if you've held it, you've already benefited from that massive jump over the last two years so you're still ahead. Or if you're trying to refinance and your property price has dropped in value below, uh, that 20% equity, then sure. You might have some issues.

Otherwise don't try and time the market. Property should be a long term investment. And for the love of God, ignore clickbait headlines like that because they, yes they're telling you part truths. They're just not telling you... That headline doesn't tell you the whole, whole truth.

If you've got any questions, please, just hit reply. I'm always happy to answer. If you are watching this before the 5th of September, make sure you join me on the Financial Self Care Challenge, and let's give your finances a boost. For the more than, uh, 500 of you that have joined, I'm so excited to jump in and play with you starting on Monday the 5th of September.

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