Will property prices fall? When? And by how much? What investors need to know Listened to an interesting pod earlier by Christopher Joye for anyone that is interested. Some points and in his words for those that don't want to listen to it. 12.5% -25% drop in house prices over a period of time across the board. Mainly Syd and Melb. 4 major banks have to increase rates as their returns are shrinking, because the regulator is forcing them to hold more capital and reduce leverage. The four major banks have about 5% equity deposits on their balance sheets and 95% debt. Which means they are leveraged about 20 times. As they are forced to use more equity and less debt, their returns are falling and they are going to try and increase home loan rates. Investments and home owner occupier. That is inevitable over the next two years. Cash rate is at 1.5%, let's assume the rba goes 100 basis points. So the cash rate goes to 2.5%, that means you're going to get term deposit rates at potentially 3.5%-4%. If you can earn 3.5-4% risk free with no transaction costs and daily liquidity, that will beat most of the yields you get in residential today. So there will have to be a repricing. The key for investors is, I would be looking to exit the market over the next 1-2 years before the first rate hike starts. There will be tremendous opportunities when prices do fall 15-25%. If you get more than 100 base points hikes, you will have a lot of borrowers that can't afford to repay their loans. Even though they think they can. I'm very bullish in housing over the next 10-20-30 years, the fundamentals are very strong. Strong population growth, immigration. The RBA will be raising rates due to economic strength. The residential market is well over due for a good reckoning. Doesn't mean it's not a good asset, just means we need to time our way into the asset class. I think this idea you can blindly hold onto property and ignore the cycle is madness. I think we will see a 1.5 to 3 year correction in prices, and I think the RBA will cut rates, or stop hiking. If prices fall 12.5-15%, you will see suburbs drop 30-40%, perhaps even more. You saw this in 2008-2009, in Portsea, Palm beach, in Toorak, Point piper. Prices were slashed 40%, premium markets.