In some places house prices have increased over recent months. Though medians have risen slightly (Perth etc) volume is down. FHBs are still failing to enter the market, so turnover is predominantly investors.

I'm thinking the money morning article is correct (ATM) Australia may avoid a US style crash and is likely to enter a long Japan style deflation. If this happens, IRs may not be able to rise for some time yet.

Besides, the banks wouldn't be letting you lock for 5 or more years so cheaply unless they were betting on low IRs for that time.

Will IRs get lower? Can they get lower? What does this do to the economy outside of house prices? Can someone answer that?

The government and RBA will try to support pricing, possibly offering stimulus and definitely using IRs as a blunt tool, to help the balance sheets of the big 4. No one wants to see an Ozzie bank go down, so their integrity will be defended as much as possible.

2007 was kind of the national peak. 2008 shaved a bit off the top. The Rudd handouts and FHOG boost (probably more to help his wife with her investment property than anything else:)) only served to get prices back to the peak by 2009/2010. Since 2010 the market has not been healthy but it is only really this year that concern seems to be becoming widespread.

Who knows what's going to happen. I have been saving cash and waiting. It's getting close to the point where buying would cost me no more than renting – but IRs are unreasonably low. I like to factor in a spend at average IRs of around 10%, rather than the current 7-8% most banks are offerring.

Hey all – long time no post.

It does look very much like stagnation at this stage. Japan in the 90s = Australia in the 2010s

This means, though, if you haven't entered the market, saving is a better option than buying. If you are in the market, selling will be subdued for quite some time.

The test is still going to be BB retirements – no income means no NG. Those who have their IPs paid for can hold on, those who do not may have to sell.

The market isn't picking up without another cash injection.

So is there a way to bring a REA to task if you suspect they don't submit an offer?

What it has always been. That the market is overvalued relative to national incomes.

Why are you so sure? Perhaps it will result in less spending on inflated prices. Look at retail. Do we need new consumer items all the time? Probably not – that's why people are buying less. Likewise, do we need bathroom makeovers as often as we have them, or do we just need bathrooms that work? One way to get a guaranteed working bathroom without having to worry about paying for it is rent.

That's not what is happenning ATM. I agree there is no desperation to sell yet but no-one is prepared to pay more either. There is an OS – 300k places up for sale nationally and rental vacancy increasing. 22 mil  people, living an average of 2.5 people per house, means the country requires around 8.8 mil houses. We can round that to 9 mil. 3% is for sale and another 3-5% is up for rent. If all of those places are needed, there should be about 1.7 mil displaced residents. When massive genocides occur in a place like Africa, you end up with that many displaced peoples and the UN is called in – I don't see them here?

If the bank will extend the credit to them. I agree that people are sheep and they will blindly follow the flock as they have in the era of easy credit and increasing house prices. These sheep aren't sobred enough by drops yet to not borrow if buying gets cheaper than renting but that is still a long way off. And, if it were to happen, the bank would have to be willing to lend to them. As we have seen recently and as I have preached for a while, the RBA and our banks will decouple totally. A 5% hit on property values like we have seen over the last year isn't enough to scare the sheep but it is enough to make the banks cautious of lending. For each percent values decrease, the banks will want roughly that as a deposit – they have to protect themselves.

This is a bigger cycle, it is a cycle that defines the cycles within cycles you mention. Demographic pressure and unsustainable credit expansion across the whole western world will force it to contract. Things will pick up again, when the contraction is deep enough for sustainable growth to resume.

My analysis was far less wafty than yours?

Yes, you can sell your peas if there is demand and funded customers. Pretty hard to move them if the cutomers can't pay.

This graph (though a real index and not logarithmic) represents Ozzie property prices more as I have come to understand them.

http://www.macrobusiness.com.au/wp-content/uploads/2011/11/Long-run-mortgage-rate-and-price-index.png

I think a graph like this starts to get really interesting when you plot rental returns, wages and inflation against it aswell. Rental returns have basically dropped off as house prices have taken off, rent has increased a bit but not as much as prices. Inflation and wage growth have been more or less steady, though the seperation between upper wages and average incomes has widened significantly over the last 15 years. Oddly, the property rich in Austraiia are generally on average wages, which means the top earners are investing less in property than average earners making it likely that the very rich down under are getting so because of the debt average incomes are taking on.

I just read a bit more about log scales and they basically flatten exponential growth, right? So things that grow in multiples of themselves look steady but, when they drop, the drops look worse. I dare you to keep plotting a log scale of Brissy property until middle of 2012 and see how it looks.

Is the growth above the 250k line at the same scale as that below?

Not sure if rent caps are a good idea – seriously, they might restrict growth outside of the capital cities. However, rent caps in conjuction with a phasing out of NG and CG tax exemptions – that may work.