Forum Replies Created
There is one key difference between Australia and say the USA, a country that experienced the devastating housing bubble burst. That difference is population rate. Australia is said to be growing by an equivalent of 1 new person every 91 secs. Whereas in the US for instance, the (official) growth rate is slowing down considerably.
So that’s roughly 350,000 people per year for Australia. These 350,000 people need a roof over their head! Wow! Also, people tend to forget that Australia is an infant in terms of its age since the first settlement, so we have tonnes of potential and growth to do.
I agree with the fact that this bubble(I’m reluctant to call it a bubble) ain’t ending any time soon, however, I will dare to say that it wont end at all(given the population growth and borrowing interest rates to remain at current rates or better). We will continue with the usual ebb and flow of any economic cycle, but I doubt that there will be an armageddon style implosion in the Australian housing market (especially in Syd/Melb)
I am finding it more and more difficult to conceive that the interest rates will normalize again. Lets face it, if the interest normalize to the equivalent of say 7%-8% that would cause catastrophic effects to the borrowers cash flow. For one, rents would sky rocket (bad), and in same cases would be foreclosure (worse). Lets keep in mind that the banks don’t want any property crash. Most investors borrow 100% of the funds so the banks and their insurers are actually at risk should there be a crash.
The most interesting thing here is that when property was on the up side and was during the crazed period last year, everyone (the media) was attempting to slow the insanity down. You need to ask yourself why? Why would they want to dampen sentiment? Experience tells me that something else is coming the will drive house prices to astronomical levels.
Remember the housing booms of not so long ago, the same sentiment would be around when house prices doubled? You would hear the attendees of an auction walking back to their cars uttering the words, “That was nuts!”, “Insane!”, “Are you serious?!”, “WTF is happening?” etc. Now, those prices that were so high back then (I’m talking about the the early 2000-2010) have now doubled again!
Back to my question about what will drive house price up again. That answer my friends is simply this, interest rates are going down again! In my opinion, twice this year. Global interest rates are heading towards 0%. And in same countries, its negative. Currently the RBA is sitting on 2%, two cuts of .25% are coming to bring it down to 1.5%; and who knows where we’ll go from there..
Keep your eye on inflation and unemployment figures.
Happy investing.
##########
Disclaimer: This is NOT investment advice. Please speak to your qualified financial adviser for investment advice.
##########
