How can property prices fall while housing becomes less affordable?

Well, welcome to the great Harry Houdini housing vanishing trick, guys, where house prices shrink, your borrowing power disappears, and for the grand finale, the bank pulls a declined pre-approval out of your empty wallet.

So the answer is that house prices are only one piece of the puzzle, because higher interest rates are shrinking our borrowing power faster than prices are falling, while still raising our loan repayments.

And at the same time, our higher living costs are attacking deposit savings like seagulls and hot chips.

So Houses may be cheaper, but the finance bridge is actually narrower, which means a cheaper house you can't finance isn't more affordable.

It's just a bargain sitting behind the bank's locked door.

Now, look, Bushy, does all of this create an opportunity of sorts or is it another locked door?

Well, both, actually.

How can property prices fall while housing becomes less affordable?

Well, welcome to the great Harry Houdini housing vanishing trick, guys, where house prices shrink, your borrowing power disappears, and for the grand finale, the bank pulls a declined pre-approval out of your empty wallet.

So the answer is that house prices are only one piece of the puzzle because higher interest rates are shrinking our borrowing power faster than prices are falling while still raising our loan repayments.

And at the same time, our higher living costs are attacking deposit savings like seagulls and hot chips.

So houses may be cheaper, but the finance bridge is actually narrower, which means a cheaper house you can't finance isn't more affordable.

It's just a bargain sitting behind the bank's locked door.

Now, look, Bushy, does all of this, you know, create an opportunity of sorts or is it another locked door?

Well, both, actually.

And tell us a bit more about this and what the opportunity is there.

Well, I think the biggest issue with new builds at the moment is that a lot of the estates are too far away from the centres of town.

And we've got a situation where people enjoy more low maintenance living these days.

So why not take some of the existing property with much larger yards, potentially retain the existing home and build a new one on it or demolish the whole thing and add two or more.

And suddenly you're using the proven location where people want to live with the benefits of new build on either the pre-existing home or the new build homes and you've got pretty much the best of everything working for you.

Yeah, and what are some of the sort of potential traps, I guess, in this space?

Yeah, well, exactly right.

And they are some of the traps that do come in and they're pretty much, it comes down to four key things really, guys.

What has changed with the way modular homes can now be financed?

Yeah.

Well, uh, this is a really good story because up until now, banks have treated factory-built homes a bit like suspicious luggage at the airport.

They wouldn't release the money until a house had safely landed on site, which is a bit like delivering the fire extinguisher after the shed's burnt down, guys.

And, and to be honest, about as useful as contraception at a convent.

So yeah, technically available, but actually practically pointless, which means that flatpack pl-finance is finally, uh, and has, has been a bit of a financial farce up until now, but that's finally changing, I'm glad to say, because one major bank can now fund up to 60%, sometimes up to 80%, while the home's off-site.

And Tasmania is also backing that same gap with a government guarantee.

[laughs]

What has changed with the way modular homes can now be financed?

Yeah, well, uh, this is a really good story because up until now, banks have treated factory-built homes a bit like suspicious luggage at the airport.

They wouldn't release the money until a house had safely landed on site, which is a bit like delivering the fire extinguisher after the shed's burnt down, guys, and, and to be honest, about as useful as contraception at a convent.

So yeah, technically available, but actually practically pointless, which means that flat pack pl-finance is finally, uh, and has, has been a bit of a financial farce up until now, but that's finally changing, I'm glad to say, because one major bank can now fund up to sixty percent and sometimes up to eighty percent while the home's off-site.

And Tasmania is also backing that same gap with a government guarantee.

So, you know, factory fabrication and factory finance are finally facing the same direction.

The money can now travel with the house instead of waving goodbye from the loading dock, so it's really good news.

[laughs]

[laughs]

So, so yes, as long expected, actually, prices in some areas are actually finally cooling, but cooling isn't crashing because what we're seeing is the normal property S curve of growth doing what it always does, where local areas move through a sort of 10-to-15-year cycle as they grow strongly for two to five years, which they've just done in many parts of the country, then generally soften 5 to 10% as the overstretched spring returns to equ- equilibrium, and then it flattens for a period before going through a next growth spurt.

So that's not a disaster.

That's normal property breathing.

And as you've said, Renee, uh, following the sort of post-COVID sugar rush, many locations have actually had years of growth dragged forward by cheap money, low listings, FOMO, and stimulus on steroids.

[laughs]

Yeah, well firstly, don't yell back.

[laughs] And then pull out your calculator and separate the weather from the climate because property weather is the short-term headlines, rates, oil shocks, budget noise, and nervous Nellies in needy pajamas, guys.

Yep.

Uh, so, uh, so, uh, we sort of came across a, an approach to life that's really about, uh, making sure we're in a position where we could fund our lifestyle without us physically having to do too much of the production.

So, so the, uh, if you sort of boiled that down into a, a simple exercise, e- everything that we did and invested our time in from a business perspective had to produce an income that didn't require us, it had to grow in value, and it had to be resalable at some point.

So we, we started a property management business, would you believe? So I went from architect to property manager.

Uh, we then realized that if we... 'Cause property has always been a big theme in, in both of our lives.

Actually, d- uh, Sonia's dad used to be involved in real estate.

Uh, so we, uh, built that arm, then we got into finance broking, uh, because if you can't get the money, you can't continue to invest in property.

What else did you do, Bushy, with, with the book?