There have been more gamblers than investors in the property market in the past two years. Believing that prices would keep rising, these gamblers are now realising they have backed losers.
With rates rising and values falling, they are trapped. To sell may mean a hefty loss but to hold will surely mean a steady loss as rents fail to cover interest payments.
With today’s announcement of another interest rate rise, thousands of investors will be reaching for their calculators and doing the sums they should have done earlier. It won’t look good. Faced with two choices sell and lose or hold and lose even more, many will sell now.
The big danger with the current property market is that greed may be replaced by fear. The so-called correction is inevitable. How bad it will be depends on the level of fear that takes hold as property players realise that the days of backing certain winners are over.
If too many choose to sell, prices could fall quickly.
Panicked punters are not good for any market.
*Neil Jenman is a real estate authority and author.
