Property investors should not be afraid of projections for a sharp drop in house prices, according to an expert.
Headlines about a sharp drop in prices tour several news sites, highlighting the recent Commonwealth Bank of Australia (CBA) projection of a 32% drop in values.
A quick Google search for the latest ABC projections will show that many news sites have highlighted the 32% drop in prices. Michael Yardney, director of Metropole Property Strategists, said it was essential to understand that this was the "worst case scenario" of the ABC.
"This scenario, which is not their base scenario or the most likely scenario, assumes a two-year recession, and that is not what the RBA or the International Monetary Fund thinks. that it will happen, "Yardney told Your Investment Property.
According to the ABC, the most likely is that prices will drop 11%.
"CBA suggests a shorter downturn is more likely. In fact, if CBA truly believed that house prices would fall 30% are likely, they would not lend borrowers 80% or even 90% loan ratios -value, isn't it? "Said Yardney.
Read also: Thinking long term is the key
In a TV interview with The Business of ABC, ABC CEO Matt Comyn said the price drop of 32% assumed unemployment would reach 9% before reach 6.5% by 2022.
"We must be careful and consider a realistic slowdown, but also plan for a worst-case scenario, and that would see a sustained increase in unemployment," he said.
In a previous article in Property Update, Yardney said that investors should be able to take a long-term perspective when considering price projections.
"To be a successful real estate investor, you need to step back and take a big picture and refuse to be scared by the next bogeyman who jumps out from behind the bushes," said -he says.
Yardney believes that the long-term fundamentals of the real estate market remain very solid and that investors should seize any opportunities that may arise.
"As always, while some people worry about bad news and stay away, strategic investors will secure their future financial freedom by buying well-located real estate, recognizing that ; they only have a few chances in their lifetime to invest at the start of a new housing cycle, "he said.
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