I have run these figures before, but not in as much detail.

When you plot them against average wages and IRs over the same period, it yields interesting results.

IRs have a very strong inverse correlation to house price growth, over the same period.

Haven't noticed you around for a while Harb, seeing you back warms my subcockels.

Lest we forget, property started to seriously downturn in 2008. Even Mr McKnight from this forum was preaching pay down your debt and sell bad IPs by the end of that year.

'Twas only the Ruddsters doubling and tripling of the FHB that stopped the correction then. Now, he is ousted. Seems the mining union still has as much pull as the builder's union in this country, doesn't it? Will his ginger replacement further indebt the country to stop the inevitable downturn when its starts in earnest again? Or will she be voted out before she has to deal with it? Who knows.

2007 was just drawn out till 2009. 2010 is the new 2008.

As for me, I actually have healthy savings and purchasing plans now, which I am comfortable with if either the market falls or stagnates. My plans won't be put into effect in less than 4 years anyway, so it is more than enough time for me to know which way it is going to go. And belive it or not, some of your advise from this very forum was incorporated into these plans.

dreamtoblelieve,

One of your pin up boys, Joye, came up with the 03% decline in December.

http://www.businessspectator.com.au/bs.nsf/Article/Will-the-housing-market-cool-pd20100129-25VS7?OpenDocument&src=blb

December 1/4 is up 2.9% but month of December is down 0.3%. Admittedly Joys cliames that is becuase December is traditionally slow but slow sholdn't lead to declining prices, should it? Just less sales, I would have thought?

Here is someone from SQM wonderring how there can be a housing shortage if rental vacancys are rising. And suggesting that house price growth may be due to easy credit and not supply/demmand.

http://www.smartcompany.com.au/property/20100122-rise-in-rental-vacancies-raises-questions-about-housing-shortage-and-soaring-prices.html

The declines in 2008 I talked about were recorded by ABS and all over the news at the time, so surely I don't need to cite them again. Articles about Brisbanes apartment OS came out earlier this year, if I see one agian I will link it.

First time investors should be aware of these POVs to keep the debate balanced – if it is all spruik they base their descisions on, then that would be less nice for them.

If you are bored, why respond? I wasn't talking about hedging against property with other property, I was talking about hedging against all property with other investments.

You agree that the property market has cycles?

Do you also agree that October 2008 saw the start of a downturn but our government brought us out of it?

Is it possible that the downside of the current greater property cycle still hasn't played out in full?

BTW – my argument is not diluted, it is still thus. Australian property started over a cliff in October 2008. FHOB, Low IRs and easy credit fueled Australian property growth in 2009. Now, there is an oversupply of apartments in most major cities, FHOB has been taken away, bank lending is tightening and IRs are on the up. From this I deduce falling property values noticable from March 2010.

The rest is me trying to get you and your ilk to consider another POV.

Of course people will still be buying houses – of that I have no doubt. How much they will have to pay for them is the only question.

Read what i have written above aabout closed mindedness. Does it ever cross your mind that property prices might decline? Are you hedged against it? If you can't answer yes to either, I fear your faith in house prices is a little blind and you could get stung.

Nothing in this country has inlfated as quickly as houseprices over the last decade. Over that time period, at a quick gestimate based on a head full of stats, percentage increases are:

Wages – 30-50%
Cars – 20-30%
Food – 70-90%
City houses – 150-200%
Regional houses – 80-150%
City Rent – 100% ish

Possibly but I tend to think not. Talk to really old people (older than boomers who are themselves caught up in the debt machine as a path to retirement) and most of them can see plainly that housing and related costs are way out of wack to the long term. Talk to the kind of people that don't approve of their inner city family home being valued at 600k, can make no sense of why it is and have seen their rates quadruple in the last 10 years whilst their gardens have had no upkeep.

I honestly think the argument of wether or not Australian house prices are in a bubble is a totally mute point. The question isn't wether housing costs much more relative to everything else than it did a decade ago but rather is it sustainable.

The other points you raised are kind of opinions and emotive, so difficult to debate. Though I must say that I wouldn't term investing a passion. Wanting more wealth is a passion, so investing is something you can be passionate about but should always keep a pragmatic POV when researching and acting.

The house market in Australia, however, is something that many are passionate about:) Do you think that, if house prices continue to grow at the rate they have been in recent Australian history, that any worker other than the most highly paid will be able to afford them in another decade?

So there is one British market but Australia has markets within markets? Even though there are a heap more people over there?

I agree that too many people listen to the mainstream spruik media.

There is no denying that, as a whole, the Austrlai property market is in a bubble bigger than any other property bubble in the developed world. Sure, there could still be growth left in patches of it, dependant on how the powers to be deal with the siuation but to deny the exsistance of such an obvious situation is silly.

Recently, I spoke with some homeowners who wanted to upgrade from a 3 bedder they brought in the 90s and have paid off. To add a room to it now will cost them more than their original mortgage did – only 10 years later. To sell and upgrade could also cost them more than their original mortgage. How can that not represent an asset bubble.

From 1999 – 2009 wages went up from 30-50%, on averge. Houses went up around 200% on averge.

A cheap mortgage now cost a third as much PA as a cheap rental.

Do the maths and use a bit of logic.

So when was the last time people in Australia were economically fearful?

The majority have been greedy for at least a decade and fueled our housing bubble with that greed. When the rest of the world had property downturns, Australia didn't because of 2 things achieved by the combined actions of our government and banks:

1. Consumer confidence.
2. Flow of credit.

Just to set some posts straight.

USAs housing oversupply only became known after the crash, before than their nation was full of the same property spruik as ours. In addition, not all US states allow non-recourse loans. Most of the US mortgage holders in negative equity cannot walk away, although their supreme court is now looking at the validity of low doc mortgages that were sold off.

British Isle property markets like the UK and Ireland still claim an undersupply but crashed anyway. They crashed when credit supply was restricted. Unbelievably, Poms and Irishmen, like people here, were happy to pay ridiculous prices for houses but the banks just wouldn't let them.

I thought our market would crash in 2009 and it would of if not for the FHOB, lowered interest rates and the flow of credit. Now, who knows when it will be on? But make no mistake, all bubbles eventually burst.

My current line of thinking is that an oversupply of apartments will become blatantly apparent by March and there will be definite negative growth (1-5%) reported in the market by that time. How the government, the RBA our banks, media and the REI as a whole respond is anyone’s guess.

Mr Jelly,

Houses are quite reasonably priced for what they are. the land is too expensive. Living in a tent wouldn't save squat.

I know of one GHPCer (FHB) who purchased. FHB had almost 400k saved and brought into the middle of the market – which had experienced some significant falls. Another GHPCer (HG) is considerring building on land be donated by parents subdivision. These cases represent good value for money and no change in the standard of living for the buyers. I would proabbly buy in similar situations.

Who became a PI? Are you refferring to RumpledElf who has a couple of hovels in the outback and can't believe how much REAs are telling him they are worth?

I agree the top of the market in Australia was starting to bottom and the middle was well on it's way. I've said before that I've looked at some 4 beddys on 1/4 acre blocks that I almost consider good value. The bottom of the market here has had no real decline, however, and has, as you point out, increased.

Surely a 2 beddroom townhouse @ 370k is a distortion next to a 4 beddy freestanding @ 400k? The townhouse is selling for what it is because of the FHBG boost, nothing else. Australia is yet to see downward movement at that bottom end of the market.

As for renting, I have always held that there is an upper limit people can afford to pay. I believe we reached that last year. I see rental asking prices have already decreased near me and stock has increased. True, it is that time of year, but there is more going on then that.

FHBs are leaving the rental market in droves (obviously) and young singles are going back with Mum and Dad. What is interesting about this situation is that the perception of an undersupply is changing radically. Many FHBs are going into established places, leaving rentals vacant – so what were these established places doing last year? Chances are we are seeing much of the property that was held empty for capital gains now finding it's way onto the market.