sqm research

With Australia facing difficult conditions as the impacts of rising interest rates continue flowing through the economy, credit remains one of the most reliable and attractive ways to add defensiveness to a portfolio, strategists from SQM Research and ICG told a recent Inside Network symposium.

The property market has defied rate hikes and inflation to post higher valuations in most capitals, but that’s not likely to last, according to SQM Research’s Louis Christopher, who predicts a second-half fall. It won’t distinguish between houses and units, and it will be worst where prices have risen most.

Rate hikes are causing anxiety for Australian mortgage holders, with new research showing seven out of 10 worry about missing repayments. As large numbers of fixed-rate mortgages expire, analysts say distressed property selling is likely to pick up from its thus-far benign levels.

The current economic cycle is too changeable to set any portfolio to autopilot, according to Mason Stevens’ Jacqueline Fernley. Counterpoints to conviction are needed, and the devil’s advocate should be your friend.

New data shows Australian house prices have dropped 8.4 per cent since their peak in May 2022, the largest decrease on record. While further RBA rate hikes could deepen the downturn, experts say a crash in 2023 is not inevitable.

Economists agree the outlook for house prices in 2023 is largely dependent on upcoming interest rate decisions by the Reserve Bank of Australia, and signs of weakness are already appearing. Complicating matters further, borrowers face an impending fixed-rate cliff.

As interest rates creep north, advisers extoll the virtue of investing away from the family home and into a diversified suite of assets.

Higher interest rates could force some householders to default on home loan repayments, with new data showing the number of distressed home sales is on the rise.