Housing Boom Tipped To Go On

Apparently building figures released this morning show another increase, but it was mainly attributed to appartments not houses. I think there is still some growth in the market though not at the same speed we have seen over the past few years. Interest rates are tipped to go up half a % over the next year, I don’t think that will slow things very much. At the moment I think that is the only thing that is going to really put things in neutral a huge increase in interest rates, people who are in over their heads will have to sell up quickly and supply will be more in line with demand. I think the key to the market crash is interest rates *states the obvious* I don’t know enough about our economy to predict when they will go up in a big way but from what I read it won’t be for a few years at least. The equities market has also had a good turn over the past few quarters, I don’t know how many investors are looking at putting more dollars into stocks………crashy???

mcdeyess has summed it up very well-Interest Rates hold the key. If one looks at the banks and the fact that one can still obtain a fixed rate of 6.5% for 5 years on a mortgage, that gives us an idea that the banks dont really foresee any major movement in interest rates for some time. I would suspect that the US economy will take another 2 years to start growing at a rate that allows interest rates to increase. That is if there are no other wars, stock market crashes etc which unsettle the world economy. That also means that interest rates in Aus. should remain reasonably low for a while. The other big factors are the increasing oversupply of units and the affordability crisis in major cities. The reality that prices are not really backed by any true value because they are artificially high (like the tech bubble) seems to have little influence on buyers paying too much for their properties at the moment. To state it another way, the fundamentals of property values are not sound (in general). This will change in the longer term.

So in summary, it appear that the market is likely to go into a holding pattern for now (or maybe another year or two) with moderate to low growth but no major drop for now. When interest rates increase by 2 or more percent that will be the signal that a correction is on the cards. This correction is predicted to be anywhere between -5% and -30% and will depend on the quality of your properties.

All points above are very valid. A common concern is the “over supply” of rental properties. At the moment, this may be true. The First Home Owners Grant took a lot of renters away from the market…but the housing boom has pushed prices beyond that which the average person can fund, grant or no grant. Housing prices have sky rocketed over the last few years – well beyond the average wage. Wages simply have not kept up and this will cause an end to the spiralling prices. Sooner or later people will simply not be able to afford to buy. This will then turn current “hopeful” buyers into renters. Failing major interest rate hikes, not predicted by anyone, I believe the property market will go into a stagnant period until wages again catch up. There is already renewed interest in the share market showing, as it is clearly underpriced at the moment, and this will also take pressure off in the housing market.

ref china – i agree housesonly. bare in mind however that the huge players are already there and in a big way. the likes of BHP, rio tinto,
MIM etc etc

China has kept the raw commodity market in shape while the USA and Eurpoe have floundered.

Seems interesting that a lot of people are concerned about prices dropping. Personally, as a long term investor, I’d love to see them go backwards for a bit.

The people all over IP home-opens trying to get into the market now will work well for us when it turns… they’ll all be trying to get out. Think of the opportunities!

I love the Herd Mentality. []

I’m glad to hear that other people are waiting too.. I havn’t purchased anything all year and I am starting to feel worried that I am being left behind![^]

I’m afraid that today I think the prices are over-inflated, however, tomorrow, I will wish that I bought more today as they were soo cheap![]

#####################
Tomorrow, you might wish you started today.
#####################

I am waiting as well.
A point to ponder. It wont matter too much if interest rates remain at these low levels if you get canned from your job and you begin to have more vacancies than you can tolerate in you IP portfolio. What we had better hope doesnt happen is that companies revenues diminish, because when that happens they have very few options, one of which is to lay-off staff! Likewise, if you have one or two IP’s that you cannot tenant then you also have little option but to try to sell. In that case you had better hope that there are not too many others in the same situation as you are.

If the above scenarios sound extreme then you had better think again. This is all normal economic activity and has been happening like this for hundreds of years, it is just a matter of when.