# SELL BEFORE THE CRASH? Aussies Are About To Be Hit By The Biggest Mortgage Collapse Since The 1990s **Channel:** Scott Kuru **Source:** https://www.youtube.com/watch?v=c-xObdq3HgY **Transcript page:** https://www.withtranscript.ai/video/c-xObdq3HgY ## Chapters - 0:00 — RBA Hikes and Market Panic - 2:52 — Recent Price Falls and Causes - 5:43 — Supply Shortages and Future Pressures - 9:01 — Why Past Crash Calls Failed - 12:30 — How Buyers and Owners Should Respond ## Transcript **[0:00] Speaker A:** Aussies are not prepared for what's about to happen. **[0:02] Speaker B:** Well, good afternoon. Uh today the board decided to increase the cash rate to 4.85%. Now, I know this is not the news that many Australians want to hear, but it is what's needed to get inflation down. **[0:14] Speaker A:** The RBA just increased interest rates again yesterday, taking them to their highest level in decades. And that just triggered the biggest housing crash in the last 40 years. By the looks of it, it's only going to get worse from here. Just look at these headlines. Homes losing $9,000 a month. House prices falling at the fastest pace in 40 years. Largest property downturn in 40 years in sight. Depending on who you are, this is either the scariest news of the year or the best you've had in a long time. If you're a homeowner, you're probably worried about your home losing value. The typical Aussie home has already lost around 63,000 since March. That's about $300 every night while you sleep. If you're a buyer or investor, you might be frozen wondering whether to jump in and buy now or wait for prices to fall further. If you're renting, you're probably freaking out about rising rents and bracing for landlords to pass on bigger mortgage bills. **[1:06] Speaker A:** So, whatever side of the fence you're on, I'm guessing you're all asking the same thing. Where the hell is this property market headed? Are prices going to keep falling? If so, how far? When will the market bottom out? Most importantly, when is the right time to buy? That's exactly what I'm going to break down in this video for you. Hey guys, Scott here. What really annoys me is how the media chases clicks and views with the scariest headlines possible, while only telling you half the story. Look, I don't blame them. That's their job. It's to get those clicks. But we are talking about your home here, the biggest financial decision you will ever make. And what happens to that asset and what you decide to do with it cannot be based on 6 months of doom and gloom headlines and media noise. And that's why I'm making this video today. **[1:50] Speaker A:** I will show you the entire story so that you can make informed decisions. We are going to look at the market through three time frames. What happened over the last 7 months, what's likely to happen over the next 12 months, and also where the market is headed over the next three to five years. These three time periods tell three totally different stories, and you must know them all. You might be thinking, "Scott, you've got skin in the property game, you're biased." That's fine. I'm not selling you an opinion, I'm showing you the numbers. If you agree with me, great, and if you don't, that's fine, also. My job is to help you understand what's actually happening in the economy, so you can make your own decisions. I know most of you are flat-out working hard to pay bills. That's why this video is important. I want to educate people on where things are headed and how they can use the current housing correction to their advantage, because trust me, there is a silver lining here everyone must know about. **[2:40] Speaker A:** Before we get into it, remember, I cover the economy, government policy, and property twice a week, so you can stay ahead of the trends that affect your money and the people you love and care about. Make sure to hit subscribe, hit the bell, and let's get into it. **[2:52] Speaker A:** Let's start with what's happened to property prices over the last 7 months. In March, home values hit an all-time high. Now, almost every suburb across our capital cities has dropped in value, and prices are falling faster than at any time in the last four decades. So, what on earth has happened? Well, take a look at this chart. National home values fell another 1.2% in October, their seventh monthly fall in a row. They're now 6.7% below their March peak and 2.8% lower than a year ago. The downturn is spreading, too. Brisbane and Perth, the darlings of the property world just 1 year ago, now falling faster than anywhere else in the country, and Sydney is more than 10% below its peak. That all sounds very brutal, and it is, but 7 months is a very short window. So, let's zoom out and look at the longer run. **[3:37] Speaker A:** Over the past 5 years, national values are still up almost 16%, and over 10 years, they're up 58%. So, yes, the typical home has lost around $63,000 since March, but it's still worth roughly $325,000 more than it was a decade ago. These last 7 months are really a setback inside a much longer climb. So, why are prices falling so hard right now? Well, there are two big reasons. The first reason is interest rates. The Reserve Bank has lifted rates five times this year to 4.85% the highest in 18 years. Every hike shrinks what the bank will lend you and CoreLogic estimates a typical household can now borrow around $90,000 less. Now multiply that by every buyer who needs a loan. Fewer people turn up to auctions and open homes. The ones who do can't stretch as far and many sellers have to accept less. That's a big part of why prices are correcting right now. **[4:36] Speaker A:** The second reason is the federal budget. Investors who buy an established property after budget night do lose their negative gearing benefits from July next year. Negative gearing is the ability to offset rental losses against your wage. The capital gains tax discount, the tax break you get on your profit when you sell, is also being wound back. That's rattled investors confidence and many are waiting on the sidelines to rework their property investment strategy before getting their next property. However, you will be surprised there are still thousands of investors every single month investing into the property market. So, how much further could prices fall? Well, Westpac expects a total drop of just 10% from the March peak. CoreLogic and AMP say anywhere from 10 to 15% with prices already down 6.7% nationally, that points to another 3.5 to 9% still to come by their estimate. As for when the market bottoms out, the experts do expect the price slide to run into 2027. **[5:35] Speaker A:** Much of that comes down to buyers waiting until rate cuts are in sight and Westpac doesn't expect the first one until around August next year. **[5:43] Speaker A:** That's the short-term picture, but it's barely 20% of the story. The other 80%? The media is completely ignoring it and I promise you if you ignore it, too, you could end up making some massive financial blunders that cost you your financial freedom because this is the part of the story that will determine what your property will be worth in 2028. Let's look ahead at the next 12 months and also take a look at a problem that could hit buyers and renters even harder than falling prices. The warning signs are already out there, buried in the headlines most people scrolled straight past. We have officially entered the last era of affordable homes. Take a look at these. 10,286 apartments on hold. This first one is out of Queensland. In Brisbane and the Gold Coast alone, more than 10,000 homes worth 5.4 billion have been shelved and will not get built anytime soon. **[6:37] Speaker A:** The next headline warns that the proposed ban on self-managed super funds borrowing to buy property could wipe out another 40,000 homes from Australia's housing supply. Another study says 12,000 new homes a year could be lost on top of the 40,000 we just discussed. Then there's the government's own promise. Its flagship housing fund promised 40,000 social and affordable homes by 2029. As of late October, the government says just over 2,000 have been finished. That's about 5% of the target. And we're already seeing the impact of declining supply. When the budget changed the rules for property investors, Treasury said rents would rise by about $2 a week. Now check out this headline. Tenants hit with rent rises more than 10 times higher than government predicted. That's a huge gap between the forecast and what renters are actually paying. With investors pulling back, fewer homes are coming up for rent. **[7:28] Speaker A:** And with fewer new homes being built, there's even less relief on the way for renters. So what is stopping these homes from getting built? Building has become brutally expensive. The cost of building a new apartment has jumped 51% since 2020. And in Brisbane, one study found the cost of a typical apartment project more than doubled in 5 years. Add expensive borrowing and buyers sitting on their hands, and many projects simply do not make financial sense to go ahead anymore. That's the hidden cost of this downturn. The homes it stops from ever being built, which are not counted in any statistics or any report anywhere. This is the number you never hear about. That might sound odd because if you drive around any capital city, you'll still see cranes everywhere. In fact, construction starts were up 7% in the June quarter. So, it looks like building is booming. **[8:19] Speaker A:** The trouble is, those cranes are working on homes sold 1, 2, even 3 years ago. The orders for the next wave of homes have collapsed. The homes Australia needs in 2027, 2028, 2029 and beyond have to be ordered now and the construction needs to be started almost right away and this simply is not happening. Now, picture 2027 or 2028. Rates start coming down and first home buyers, investors, and families wanting to upgrade all come back into the market at one time. When you've got more buyers chasing fewer homes in a market in this condition, there's only one way prices can go and that will be back up and potentially back up very fast. **[9:01] Speaker A:** This is supply and demand at its simplest. Of course, plenty of people will believe prices still have a long way to fall and that the smart move is to sit on the sidelines and wait. We heard the exact same warnings the last two times experts predicted a housing crash and many who listened made one of the most expensive mistakes of their lives. Remember, choosing to do nothing is a choice. Now, I've got the data to prove it. Let's actually get into it. Let's look at what history tells us about housing crashes because the big banks have called one before and what happened next caught almost everyone off guard. Go back to May 2020. COVID had shut the country down, unemployment was climbing, and the Commonwealth Bank warned house prices could fall by as much as 32%. Even its best-case scenario was an 11% drop and its worst-case was the one that made every headline. **[9:50] Speaker A:** Reading that, would you have bought back then? Most people wouldn't have. So, what actually happened? National home values dipped by less than 2% over the next few months, then took off. In 2021, they rose 22.1%. The strongest years since the late 1980s. Anyone who sat it out watched prices sprint away. Now, you might say 2020 was different because the Reserve Bank slashed rates to almost zero and cheap money fueled that property boom. Fair enough and that's actually correct. So, let's actually take a look at another example. Here's an example from 2022 when rates were doing the exact opposite. They were rising at record pace. By early 2023, inflation had hit its highest level in more than 30 years after COVID shortages and the war in Ukraine sent the cost of living soaring and the Reserve Bank had raised rates 8 months in a row to fight it. **[10:39] Speaker A:** House prices were already falling and NAB, CBA and AMP were tipping total falls of 15 to 20%. Some headlines were even calling it the biggest crash in history. Sound familiar? In the end, values only fell a measly 7.5% in total then turned around. By November 2023, they had hit a brand new record high while the Reserve Bank was still raising rates. What happened in 2020 and 2022 was not a fluke. Take a look at this chart. It covers more than 40 years of Australian property. The red bands are downturns and the green are upswings. The upswings have lasted around three and a half times longer and delivered eight times more growth. Corrections like this one are a normal part of the property cycle and even the gloomiest forecasts and gloomiest headlines right now wouldn't wipe out the last five years of real gains. To be fair, this downturn is moving faster than the one in 2022. **[11:36] Speaker A:** So, what's stopping it from turning into a genuine crash? It comes down to four things. First, crashes happen when huge numbers of owners are forced to sell. That isn't happening right now. Mortgage arrears are still low and fewer than one in 100 borrowers owe more than their home is worth. While the typical borrower has more than a year of repayment sitting in offset or redraw. Owners are holding on instead with new listings across our capital cities running almost 18% below average. Second, building a new home keeps getting more expensive which props up the value of every home that's already standing. Third, Australia is still building far fewer homes than it needs. Even if we have massively reduced migration, we will not have enough homes. Fourth, rates will eventually come down. Commonwealth Bank and Westpac both have cuts penciled in from around August 2027. **[12:30] Speaker A:** So, if this correction has a flaw, the real question is how to make the most of it while this flaw lasts because this downturn is giving some people an opportunity they have not had in years. Now, let's bring this back to you and your next move and what the next 3 to 5 years could look like depending on where you stand. Whether you own, you're buying, or investing, this is how to play a falling market. If you own your own home and you're watching its value slip, take a breath. Over the last four decades, capital city house prices have roughly doubled every 7 to 10 years. This has happened through recessions, rate increases, rate spikes. It has even happened during tax changes. Remember, a fall only costs you if you're forced to sell, and most owners will not be forced to sell. If you're renting hoping to buy your first home or you're an investor, stop trying to pick the exact bottom and watch the signals instead. **[13:22] Speaker A:** Right now, fewer than half of auctions are selling and sales are down 23% from a year ago. That's massive. And do you know what that means? You have all the negotiating power right now, but that negotiating power will not last for long. When interest rates start coming down or when there's even talk of rates coming down, clearance rates will start climbing back above 60%, sales will pick up, discounts will shrink, and the market will start turning. Until then, buyers hold the cards. Homes are taking longer to sell. There's more stock to choose from than in any spring selling season for the past 7 years, and sellers are knocking an average of 4.7% off their asking price. This represents the biggest discount since 2019. On a $800,000 that's about $37,600 you can negotiate off. Rents are still rising, too, and rental yields are now the highest in our capital cities in more than 11 years, and that's why we still have thousands of investors investing every single month. **[14:22] Speaker A:** It's time you start studying the economy. Listen to me, the world has changed for good, and you can't rely on a wage alone anymore. That playbook is dead. It worked for your parents, it will not work for you. With inflation still eating into your paycheck and the cost of living climbing, the only real way to protect yourself is to earn more and own assets that grow in value over time. And for decades, property has been one of the most reliable. Remember, property is a 10- to 15-year game, never a 6-month one. If your finances are in order and you've done your research, a market where most buyers are sitting on their hands is when you get to choose the property, you get to choose the price, and you get to choose the terms. Just don't let negative headlines for the last 6 months influence you to make a really bad decision, a bad decision you'll have to live with for decades to come. **[15:11] Speaker A:** So, do you agree with how I read the data? And where do you think property prices go from here? Let me know down in the comments. I generally read every single comment. Once again, if you've enjoyed this video, please hit like and subscribe, and remember, I cover property, the economy, and government policy twice a week, so you can stay ahead of the trends that affect your money and the people you love and care about. Thanks for watching, and I'll see you at the next video.