I am pretty sure that the only reason the bottom is stable (or, as you say, increasing in some instances) is because of the FHBG boost. It has given extra purchasing power to young FHBs. It is a very good time for an owner of an entry level home to sell and upgrade at the moment. We will have to see what happens after June/July on this front.

In times of rising unemployment any governement is mad not to curb migration into the country. And, I actually do believe that there will be less people on this planet then there is now in 20 odd years, for a whole variety of reasons, of which Boomer deaths are one. Another is increases in 3rd world mortallity rates. Another is the potential of global conflict that always co-incide with depressions and prolonged recessions.

It will take 40 odd years for us to get to the end of this debate but if we are still posting about it we will see then:)

I am going to check out an auction – see if it sells for more or less than I expect.

Ok, so interest rates didn't go up – you were right about that. I expected governments and banks to deal with this credit crisis sensibly – silly me.

That said, you claimed house prices wouldn't drop, and yet they have – just not as far as I expected yet. The point is, niether of us could judge how this would unfold accurately, which means niether of us can know exactly where it goes from here.

We are going over the same old ground again, though. And, as fun as it is from time to time, this still hasn't played out fully. Good luck with your tenants and rent increases.

Personally, 1Winner, I only ever want to own one residential property at a time – a house in which to live. I have a belief that residential property is for the shelter of members of society and not investment. Of course landlords need to exist but they should either be a governement body or heavilly regulated. I know this view is more socialistic than most. The flipside is that I have nothing against private individuals or enterprise investing in commercial property. If I had that kind of money to park, I would consider it as an option.

I would disagree that society is still being taught the concept that rich is evil and poor is virtuous. We were until around the 70s, when we still had majority Christian values (not that I am trying to promote them, I'm happily agnostic) and since then individualism, consumerism and capitalism have become our new faiths. Out of the frying pan and into the fire.

On the financial scale there will always be rich, poor and those in between. Some will make it fairly, some will cheat, some will keep it and others will loose it. That is not an issue for me. So long as there is an overall balance. My issue is with a debt bubble in a particular asset class (which I believe should be restricted for societys well-being anyway) that has been allowed (even promoted by the banks and the governement) to get out of hand. So far out of hand that we are creating future debt to try and keep it from bursting. We don't have more rich now- we just have greater speculative equity and all it has done is made average joes get delusions of wealth.

The housing bubble was allowed to happen because the banks and the governments of the Western world were too scared to face a recession in the early naughties brought on by the tech bubble crash and 911. Instead of a few years of pain, society was steered on a path that will probably end up in depression. Gutless.

Underlying all of this, of course, is the fact that there is an ageing population bubble that we have no idea how to support. They are going to live longer than any other generation of humans before them. Without massive future debt, how do we finance this? I don't know but am sure that premature speculation isn't the answer and that is why the bubble is bursting.

So, in summation, I have nothing against real rich people. The deluded rich are another matter. And I wouldn't buy one of those American pads unless I was going to live in it.

harb wrote:

So really what you are saying is that as long as you are the one who makes a profit everything is in balance even if you were not productive and speculated that prices will rise but if someone else tries to do that by improving the property and making it more efficient then a correction is required? So what happened to your comment a few post earlier , "  It's OK to think wrong of those that make money in non productive or speculative means. It is wrong to think wrong of those that make money out of useful invention or productivity."  Was that just a load of bull because you are in the market for a property  ?

Both of my statements were consistent.

Everyone who owns property should make (more or less) profit equal to the interest they pay on the loan over a long term loan period. This generally equals wage inflation over the same period and everyone, including the banks, remains comfortably in business.

You buy a house in '95 for 150k and, by the time it's paid off in 2020, you have ended up paying the bank 450k for it but, by then, it is worth that much. That is balanced.

If you buy a house with cash and sell it down the road, you make a clean profit. There is nothing wrong with that as you are not using the bank for a service. You either worked or saved hard, so good luck to you.

And I have said this before Harb, I don't mind paying extra for houses that have been genuinely improved with well made decking, pools, looked after grounds etc. This is not the kind of speculative value I'm talking about and you know it.

We have just had 20 years of housing inflation squeezed into under 10 and anyone should be able to see it is not sustainable. Average wages can not afford last years house prices until (provided wage inflation is reasonably linear)  2020, so the prices either have to stagnate from now or drop and then rise again.

This isn't about me. If house prices drop, I buy. If they stagnate, I keep saving and retire to a country town with some future growth potential for the kids. Either situation can happen from here – Japan or America – doesn't bother me either way. I have secure and slightly above average income so rent can not possibly rise above a price that is affordable for me to pay and save.

This is about my children and every other child their age having the same financial oppurtunities in their future as my parents and people their age had. Don't care if I go without for that balance to be restored and, as the Boomers die, it will be but it is the road from hear to that point that is uncertain. Bottom falls out now and boomers learn to live on dogfood. Prices stagnate and a lot of mortgaged gen X & Y get used to financial mediocrity. Either way, balance will be restored eventually.

No. Zero sum, balance is maintained.

harb wrote:

Would you have bought this house if you expected to sell it for less then you paid for it or did you speculate that you could sell it for above what you paid for it ?
Should we think wrong of you if you did any of the above  ?
And if I did the same but added a water tank and built a garden shed in the backyard then sold at a huge profit would it be wrong of you to think wrong of me ?

Yes. Imbalance is created and correction is required.

I guess individuals allow themselves to be individaully selfish when they are not looking at the bigger picture, doesn't mean that in the interests of keeping overall level of balance it is not wrong.

It's OK to think wrong of those that make money in non productive or speculative means. It is wrong to think wrong of those that make money out of useful invention or productivity.

And there is nothing wrong with that.

Some ideas follow. Some could be prolonged but some are impossible to avoid in the short term. I will note those with an *

1 – FHOG boost gets taken away.
2 – Unemployment keeps increasing. *
3 – Immigration keeps decreasing. *
4 – Stock increases as BB leave work and sell both PPOR and investment property. *
5 – Negative gearing is reassessd.
6 – Bank lending criterior is tightened further. *

As for the 500k replacement cost, that can easilly decrease.

1 – Land is in a bubble because state govt and developers have been maximizing revenue but soon they will realise that 10 sales @ 250K is worth more than 2 @ 500K.
2 – Commodoties have already dropped so building materials will end up costing less.
3 – Overpaid tradies will become increasingly desperate as construction decreases and work for less.
4 – REAs will start talking vendors down in bids to stay employed.

It's all tightly connected Harb. Already, near me, 4 bedddys on reasonable blocks are getting close to what I would consider worth buying. And they are only 40K more than a tiny townhouse is worth??? Yeah right. The buyers that have been supporting the market these past few months have little to no deposits and have had finite amounts extended to them as a mortgage. Poor buggers have been sucked in by some pretty evil federal policy. That is the only real floor at the moment.

Which means, quite literally, all that remains is for the bottom to fall out of the market.

Depends.

Ultimately you are looking for a PPOR right? Something to live in long term? Long term you are never going to loose that much. Eventually wages will inflate, the economy will recover and houses will be worth what they were last year again. Know ones knows how long it will take but my money is on atleast 5 years.

Ultimately, for a PPOR buyer, only 2 things matter. Do you think the house is worth what the vendor is prepared to let it go for (as you will no doubt lowball) and can you afford the repayments? You seem like you don't have to worry about repayments, so you just have to be satisfied with the price you pay.

I don't think anyone can judge the bottom perfectly. I will buy when I feel like I am getting a good deal and I can afford repayments on that deal for interest rates of up to 12% or so.

What makes you so sure rents can rise sustainably?