I don’t have a crystal ball, I wish I did, I’m not backing away from the fall I’m predicting as the data is there to indicate it. Best case scenario, we will have a stagnant market, my prediction is a “20% plus” adjustment, worse case scenario, I’d hate to think. Things may appear rosie at the moment. Wait and see what will happen when all these young couples who have over committed themselves to buy an overpriced property and cannot afford the repayments. I’m not a pessimist as I’m still investing, I’m a realist who says be very careful. oh yeah and the 20% wasn’t plucked from thin air, it was REIV report in the Age. Mainly in the new suburbs where properties were cheaper.
I would like nothing more than being wrong, let’s compare notes in twelve months from now.

Now brace yourselves….

I’m by far a doom and gloomer, perhaps my headline was a little harsh but it was to get noticed. I’m still buying property, still renovating and still building. But I’m using a different strategy now, if properties go down 20% or more, I will survive it as I’m being realistic. Those out there who keep buying anything and over committing themselves will get caught out and lose big time. This concerns me in a big way, as no one should have to go through that. US is not out of the woodwork yet, in fact it will still get much worse. The government is trying to sugar coat it and make it sound positive but the facts indicate other. It will affect us here too, don’t think it won’t. With a reduced FHOG at least 2 or 3 interest rate increases by Christmas, next year will be an interesting year. The only thing I see sustaining the current property value are investors. As first home buyers will be forced out of the market. This will create higher rents and possibly increase in property prices. No I’m not contradicting myself, as when something goes too high, it has to crash, and it will, I just don’t know when.

2 cents here,

My sister in law is a teacher in Sydney, she bought a 1 bed apt, couple years ago and has sold it (at profit) to buy a 2 bed (500k approx) She lives alone. My soon to be sister in law is a nurse (just qualified) starting wage (at the ripe old age of 24) is 45k, then her wage goes up EVERY year. Top nurses earn up to $100k. She and my brother will be buying a house in Vic early next year.

I like doom and gloom reports and when Henny Penny runs around in the chook yard (tv, papers,youtube) yelling that the sky is falling, I start smiling. Because every idiot believes it. All of a sudden bargain buys start happening and people panic sell and cash out. Yeah ok it's crap because all of a sudden my IP's can be undervalued, but long term when the market goes back up again it usually goes up by more than is lost.

My parents paid 93k for their very first home in 1998 and if you remember that was the recession we had to have. Ten years later it is worth $300k.

There will be demand and we will need supply. I think a lot of people like to "talk down the market" Just like Wayne Swan 'talked down' the economy. Read between the lines. Do these people have a vested interest in doing this?

The reason governments step in with incentives is because that is what they are supposed to do, GOVERN! They get paid to ensure that the country is not in a hole in the ground financially.

PS as far as emissions trading it is just another way to charge you for the air that you breathe! They charge for everything else.

Ok enough of my 2 cents,

D

I think where a lot of the analyst are getting it wrong is not understand the principal of supply and demand. The US property market crashed because of oversupply in houses where as in Australia its quite the opposite. We have a strong net migration of people coming to australia, but construction of new housing is not meeting these demands. So in the foreseeable future, I can only see property price either stay PAR or increase. Certainly rental prices will increase as more first home buyers are pushed out of the market and force to rent due to increase interest rates and house prices. So for those who already own properties, we are all in a good position.

Well your certainly entitled to your opinion, but lets just take a look at what your saying and perhaps a little enlightenment along the way – well my opinion at least.

Dan, I'm still a property investor as we speak today, in fact I bought a property 2 months ago and looking at developing 3 units. But the data is there to back up my (Garbage Rant as you put it), outlining how over inflated our properties really are, people, couples with good jobs, nurses, teachers etc. cannot afford to buy a house. Something is wrong.

Well depends on what house they want to buy really – the kind of house my parents bought as their first home back in the 1960's I suspect  would be considered unlivable by today's generation, ie needs to have 4 bedrooms, rumpus, home theatre, office, 2 bathrooms etc.. well all that costs a lot more, but if for their first home they aimed for what they could afford, we'd probably find nothing has really changed, except peoples expectations of what a first home should be…Oh and the furnings and plasma tv have to be barnd new and classy, not like the hand me downs I was grateful for in my first home… so you tell me, are our expectations inflated or are the house prices. They actually can afford to buy a house. just like our parents could.

Our prices are much dearer in Australia than what they were in US before the crash. We have further to fall. The only reason we haven't crashed yet is due to the population explosion the country is undertaking, and a quick fix injection of funds, with no long term prospects.

Wow quite a mouthful there.. its true we seem to have the most expensive houses in the world, but thats what demand does, it pushes the price up, everyone wants to live here, so you have to pay to live in paradise. Now our banks haven't done anything near as stupid as what US banks have done with lending and given the demand in Australia, if a default occurs, its pretty much assured of being snapped up by someone looking for a bargain. The stats will back this up, the demand is going to continue folks, the population increase isn't a myth. So house prices are going to continue to be strong.
 
If the Real Estate Market doesn't crash within 12 months, at best it will just stand still, but forget your 10% yearly increase in property, those days are well and truly over. Renos and developments will still bring you profits, but capital gains?

Well again, the stats just aren't backing you up. If you go and look at house prices for every year since 1900 and then average them out, you will find on average house prices increase 10% each year. Of course taking a snapshot of any 3-7 year period will see wild fluctations, but it depends what you're looking to do in the property market. if you're in it for the long haul ie 10-20 years, you will see an average of 10% growth per year over that time, despite whatever crashes may occur. if you're looking to make a quick buck in the next few years – who knows, I personally suspect it will be a little flat, but I'm in it for the long haul so don't really mind.

I remember in the late 90's when I was investing , we all thought hosues were way overpriced and didn't see any chance of growth. Guess what, come 2001 and house prices doubled, in fact some tripled. I don't subscribe to the theory that houses are too expensive. Its what the market is prepared to pay and I don't see pay packets diminshing, so house prices will continue to rise and I fully expect in 10 years time my $400,000 investment property will be worth close to $700,000. I also expect my wage to have doubled in that time, just as it has over the last 10 years.. The world moves on, inflation occurs and we all go thorugh economic cycle after cycle. Demand wins everytime.. and its getting bigger…

John.

Hi John good and interesting comments …

It is good to have the experience to look back and I was born in the 60s which is another generation again …

Yes prices going up because of civil works and labor costs not to mention materials for housing …

The only change over time in the last 10 – 20 -3- 40 – years is "times earning ratios"

In 1984 a friend of mines husband bought a waterfront property in Hunters Hill (5 Woolwich road) for $425,000.00 – oh his accountant told him he was a fool haha … his yearly wage then was about $70,000.00

Today the property is worth 8.5 million (has a new house on it now) and his salary is $170,000.00 ???

Nah I like it, You are very right that we are all part of the market and yes if sentiment is good all our profits go up so we probably all have some sort of interest to push. I never said property wasn't overpriced. Yeah in many areas it is ridiculous. I rent in one of those areas. I was making the point that everyone seems to think that people in middle income bracketed jobs will not be able to buy houses, but their incomes will inflate over time right alongside the property market. Yeah ok property prices may be many times the average income but people will still be able to buy property. Either that or in our capital cities they will start living in alternative style accomodation such as barges like the do in London. (Tell me if I'm wrong Brent)

I thought our govt was doing the 'affordable' thing with NRAS housing, we will see how that goes.

And yeah, yeah it is paradise that's why we live here and not Antarctica

W4L if your friend was to buy Sydney waterfront today his Salary would have to be that much (don't know many people who earn that much in Sydney? Really?) If the wages couldn't keep up with the loans property prices would be MUCH lower.

Just some thoughts….

D

Don't worry 1Winner,

There seems to be quite a few subscribers to the "Australia's Not Uniquly Special Society" or A.N.U.S.'S for short. They seem to have insider knowledge about some other  tropical island paradise where there are clean wide roads, good health care and schools and plenty of opportunities to buy houses and own business's. Where everyone is treated equal and can get a fair go.

I have tried to google earth this mystery island but have so far been unable to discover its whereabouts. If only I subscribed to this club!

Yours in cheek

D

http://www.smh.com.au/business/property/house-price-rises-to-extend-into-2010-apm-20091211-kobu.html