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Nearly three-quarters of brokers do not expect property prices to fall as far as 20 per cent, despite market forecasts suggesting otherwise.
A new poll of mortgage brokers from mortgage broker platform Hashching has revealed that nearly three-quarters of respondents expect the fall in property prices to be softer than market forecasts.
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While Australia’s house prices have been declining for the past four months, and economists are predicting more price falls to come, the broker channel is generally more optimistic about the extent of the price correction.
Recent commentary from property researchers and economists have suggested that house prices could drop, with ANZ recently suggesting values could fall 20 per cent by the end of this year before increasing again in 2024.
However, the third-party channel is more optimistic, with 72 per cent of respondents to the Hashching survey saying the property market downturn would be softer than the 20 per cent losses predicted (however, exact figures on what the downturn could reach were not available).
Moreover, in a recent opinion piece on The Adviser’s sister brand Mortgage Business, the managing director of broking franchise MoneyQuest, Michael Russell, said he was “not the least concerned about forecasts of falling dwelling prices, as housing forecasts have been inaccurate for decades”.
“The four major banks are forecasting a dwelling price fall of up to 17 per cent through to December 2023, but history has shown that these predictions are not reliable,” he said.
However, with house prices now starting their downward trajectory, brokers have flagged that borrowers may not fully understand how they could be impacted by negative equity.
Eighty-four per cent of brokers responding to the Hashching snap poll said they did not believe that their clients understood the full implications of being in negative equity and how it would impact their mortgage (for example, by reducing their options for refinancing etc).
Three in five brokers said they believed that it was their responsibility to educate them.
Noting the figures, Hashching chief executive Arun Maharaj said: “This month, we wanted to explore the implications of negative equity and the expectations of brokers on how the next few years will play out. It’s not surprising, after a decade of strong property growth, that brokers are cynical that their clients fully understand the implications of negative equity.
“What’s interesting is that we also questioned who should bear the responsibility for educating the public — the lender, the broker or the customers themselves,” he said, highlighting that the majority (60 per cent) felt it was their responsibility to educate their customers as to the implications of negative equity.
“Honestly, we agree. Part of being a good broker is to look out for your clients’ interests and if they’re planning on any investment strategies that rely on refinancing or tapping into home equity in the near future.”
The monthly poll also asked brokers for their thoughts on the cash rate trajectory.
Sixty per cent said they thought the Reserve Bank of Australia would increase the official cash rate today (6 September), while 40 per cent thought the rate would be held at 1.85 per cent. (However, the big four bank economists expect the central bank to increase the rate by 50 bps today).
Most brokers also thought that while the official cash rate will continue rising over the next two years, it would be unlikely to reach more than 4 per cent in the next 24 months (with just 16 per cent of respondents thinking it would).
[Related: Refinances anticipated amid 4th rate hike]
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