Could fear of overpaying shift housing market?

Independent economist Tony Alexander says extending the bright-line test to 10 years and wiping away investors’ ability to use mortgage interest for tax deductibility could lead to a situation where buyers start to question the ability of the residential real estate market to keep rising.

“Many will worry they are buying at the peak and could be in a falling paper wealth situation in the near future.” 

Alexander points out this is not the same as saying people are fearing negative equity. This is when a house price falls to below the size of the mortgage.

“Such a situation is extremely unlikely except for those buyers buying at the peak with a 5% deposit.”