Australian residential property prices gained 0.7% through July, with the year-to-date gain now at 6.2%. Speaking at Livewire Live recently, Steve Johnson of Forager Funds said that it was, however, perfectly feasible that house prices could fall by 25%, and listed three potential catalysts.
Responding to a question posed by an audience member during the Q&A session, Johnson said:
“People’s capacity to pay is what’s driving prices. We’ve had interest rates come down so far, that people can pay 2-3 times the price for the house with the same servicing costs that they were paying ten years ago”.
As well as listing several potential triggers of a pullback, he outlined the implications to the wider economy, and to investors, of the significant mortgage burden carried by Australians.
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