We remain cautious on the property market but not overly bearish. The main headwind for property prices domestically will be the ability for potential buyers to access not only financing, but to access financing at a competitive interest rate.
Over the past 6 months we have seen a number of constraints placed on the banks by APRA, as well as changes made by the federal government in regards to acceptable deductions on investment properties. On their own, these changes may not present a headwind of any particular force, but as a group they may provide enough headwind at the margin to take more speculative and lower quality buyers of property out of the market.
The balancing act facing APRA and the RBA is to take the heat out of certain property markets but at the same time not damage the confidence of property owners and general consumers within the economy. We are of the view that with a benign inflationary environment, there is little scope for interest rates to rise and therefore we do not foresee an immediate sharp pull back in property prices