A RESET IS COMING

The RBA has lifted rates again, to 4.60%. Four rises this year. And the quarter % everyone fixates on is the least interesting part of it. What does the damage is the stack. Rise upon rise, with the full bite of the earlier ones still feeding through, until borrowing capacity shrinks and buyers decide to wait. That is how you get a reset, and one looks likely over the next twelve to eighteen months.

Let me be clear about what a reset is and is not, because the word frightens people. This is not a prediction of some 20% crash. Australia almost never falls apart that cleanly. A reset shows up first in behaviour, not price. Enquiry thins. Homes start sitting longer. Auction numbers soften. Sellers who were holding firm get flexible. Sale volumes drop. Only after all of that, often months later, do the settled prices ease. The warning signs arrive long before the number does.

For a buyer, that slow unwind is a gift, if you can read it. The scrum of the last few years, ten offers and no time to think, gives way to room. Room to inspect twice. Room to negotiate. Room to walk. That is where people buy well instead of buying scared.

The correction is probably not the whole story. Looking at how these cycles have run before, the more likely picture is a soft patch for a year or two and then a long, fairly flat stretch after it. Think the 1990s, not 2021. Back then the market came off a boom into recession, lending dried up, building fell away, and prices did very little in real terms for years before the next proper run. A decade where housing does far less heavy lifting than it has lately is a real possibility. Fewer sales. Softer real prices. Incomes slowly catching up to values instead of the other way around.

If you were banking on quick capital gains, that is sobering, and it should be. But most of the people we deal with are not flipping. They are buying a home to live in, or holding a good apartment for the long haul. For them a flat decade is survivable, and often a smart thing to buy into, because the entry price is kinder and time is on their side.

There is also a twist that favours anyone who already owns well around here. A reset does not cure the housing shortage. It feeds it. The same expensive money that puts buyers off also makes new apartment projects impossible to get off the ground, so even fewer get built. Commencements are already falling. Approvals are not keeping pace, and an approval is a long way from a key in a door. We now finish roughly half as many homes per hour worked as we did thirty years ago, which is its own scandal. Demand cools for a while, supply cools harder and for longer, and when rates eventually settle the buyers return to even less stock than before. Too much heat, then a reset, then too little building, then the next shortage. The same loop, again and again.

So the scarcity holding up a well located inner-city apartment does not go anywhere, even through a soft spell. The correction is temporary. The shortage is structural.

None of this is a nudge to rush in. Overpaying in a flat market is still overpaying, and we would say as much to your face. The play is to be ready and unhurried. Know your building. Know your number. Be the calm one while everyone else reads the scary headlines.