One Bedroom

“The property market will drop 30-35% by the end of 2022”.

This bleak warning came from Matt Comyn, CEO of CBA, in August last year.

I remember it well.

I was working with a single mum who was slowly getting back on her feet after one of the most nefarious divorces I think I’ve ever witnessed.

She had a few dollars saved up, but knew she’d never get back into the Sydney property market because it was too far out of reach. So I suggested a couple of regional towns.

Eventually she found a lovely town up north and no sooner had she unpacked her bags, the local property market began to rocket.

She applied for finance, and when she phoned to say she could buy a bigger home, I nearly fell off my chair…

“So let me get this right. You’re 51 years of age and the bank has offered you almost half a million dollars. Correct?”

“Yes!!” she said excitedly.

“Which means you’ll be 81 by the time you pay it off, even though you plan on retiring in your late 60’s. Correct?”

“Yes” she said, a little sheepish.

“Did you explain this to the bank?”

“Yes. And they just said that when I retire, I can downsize to a one-bedroom apartment”.

“Oh, and by the way, I only need a 12% deposit” she added.

That phone call took place in March and ever since then, the market has kept moving further and further away on her.

This week she rang to say she’d stopped looking.

She was trying hard to be positive about everything, but her pregnant pauses were full of disappointment. You could hear her head dropping on the other end of the phone.

“Properties are selling 30-40% above the asking price and I’m supposed to be in the country. I don’t understand where all this money is coming from.” she said.

She raises a good question, of which I think there are three answers.

Firstly, it’s never been cheaper or easier for people to borrow money and the banks are happy to lend as much as they can. They’re happy to surf this wave while it lasts.

Secondly, borrowers are scared to death they’ll never get a start and have become manic.

Thirdly, baby boomers have started selling their empty family homes and are ready to downsize with lots of cash to spend. They’re in SKI mode (spending the kids inheritance) and they don’t care how much they pay for a smaller home.

There’s a stack of single parents out there who have to start again. And it’s not easy.

Increasingly, a lot of divorced women don’t want a ‘Man Plan’ because they don’t trust men.

Equally, a lot of blokes experience the same thing.

Both sides would rather do friends with benefits and leave it that. And who could blame them. It’s a hell of a lot easier.

People talk about their children being left behind but there’s also a growing cohort of single parents who feel the same way. The difference is time.

We’re in the most bipolar market in history and in the space of one year, we’ve gone from the edges of a pandemic depression to full blown mania.

Everything cycles, but extremes never last.

And just like summer follows winter, this too shall pass.

Have a great weekend!

Adam

Back paddock – “if you cut corners, you’ll go round in circles”. Dean Boxall, coach of Olympic gold medalist, Ariarne Titmus.