Elite AgentOpinion

Andrew Cocks: First-home buyers seize the moment

In the past few months, calls for the Reserve Bank to ‘do something’ about runaway house prices have become louder, ignoring Governor Philip Lowe’s repeated response that it is not the job of the central bank to meddle with house prices.

Dr Lowe’s refusal to shoulder responsibility for a property market that has lost connection with real
value stands in contrast to the Reserve Bank of New Zealand, which has introduced new curbs on
lending to reign in prices that have risen more than 20 per cent year-on-year.

For anybody who has just signed up to an inflated mortgage to secure a home sold for well above its
intrinsic value, you’d better hope that Dr Lowe is as good as his word and he keeps the cash rate at
close to zero until there is firm evidence that wages are on the rise, which is not expected until 2024.

Of course, Dr Lowe is right to hold his ground. Fears that buyers will be burned when the cheap money
tap is turned off and interest rates inevitably rise, ignores the onus upon every borrower to take
responsibility for their own decisions and actions.

And right now, thousands of Australian first-home buyers are weighing up the risk and making a conscious and grown-up decision to take advantage of low interest rates while they can and get a foothold in the market.

The naysayers pressing the Reserve Bank to put a brake on the property market by raising interest
rates are doing first-time buyers no favours.

In the main, these buyers are rational people making rational decisions, aware that low interest
rates are not forever, but equally aware that in the calculation of mortgage versus rent, ownership
comes out trumps.

Most people who enjoy the comfort and security of substantial equity or outright ownership of their
home, took their first step with a high degree of trepidation, mindful of the risk.

Financial risk is something best embraced when young. There’s time to ride out the highs and lows
or execute a complete change of strategy if things don’t work out.

It’s why super funds steer younger members towards high-risk, high-return portfolios and older members towards balanced funds.

Speculation about what the Reserve Bank may or may not do has made first Tuesdays a much-anticipated date on the real estate calendar of events.

But the smart money is also keeping a close watch on the banks. When the Commonwealth Bank
raised four-year fixed term rates from 1.99 per cent to 2.19 per cent it prompted speculation that it had begun
factoring in a lift in the exchange rate.

History and innumerable property graphs tell us that the current price boom will run out of puff but
let’s hope that during this rare window of affordability, while investors are still playing coy, first-home buyers seize the opportunity.

A little risk when you’re young can reduce the risk of homelessness when you’re old.

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