I'd be very suprised if they do. There are already signs that the economy is turning.
Next year will be a big year in Industry for Australia. Migrants are still flocking to our shores. Thay all have to live somewhere.America is still a gazillion $$$ in dept but they claim things are turning
(Pity China owns them).
Oil price is slowly climbing.
Employment is starting to drop so more work starting to float around which means intrest rates will go up- as they allready are.
Really Australia is in an ok position financialy.
Put it this way, I wouldnt sell ur house !!!
If anything Im concidering locking the mortgage up
What does every one else think?
The problem isnt housing its land
nope aslong as greedy developers controll landclearing in the outer cbd and our population continues to grow housing land affordability will allways increese.
I have a house but my kids may have to move to bali to purchace land.
recently in perth the housing price has decreesed with a combination on high unemployment and the intrest rate rises people who have multiple houses have sold (some at loss) because the principle interest on the morgage is higher than the passive rental price can cover with housing prices stagnant.
I think long term yu cant go wrong with land but dont overcaptiolize.
This next economic cycle in Austraila will provide another cycle of growth.
make sure you get out before it bursts ..
ps.. keep out of unwanted debt. e.g credit cards.
If you dont have the money dont buy it ......
^ What he said.
You can argue all you want about the ratio between income and house prices compared to other countries or historically here.
You can argue that there was a crash overseas so must be here too.
You can argue that people won't be able to afford to pay their mortgages when interest rates go up, but they will have to rent which will push rents up and house prices with it.
In the end you simply cannot argue with supply and demand. If there are more people looking for houses than there are houses prices adjust accordingly, unless someone can start making more land.
(and as buster says it is the supply of land, not houses, that is the problem)
It will be interesting to see where all this goes over the next 10-20 years. I personally see it creeping up at 5-10% each year, like it still is. Wages aren't keeping up for most of us. It's becoming a monopoly, the rich get richer.
P.S. Surely cutting out the 50% break on Capital Gains is looooong overdue??? That would have a softening effect on the lower end of the market.
aust house prices are maybe highest in the world.
the usa economy will sink.
the reason is high deliberate quotas given to india + china.
usa is mostly service industry.
when you pump trillions of paper money into circulation[aust gov did this on lesser scale too] the value of that paper will fall.
the manufacturing industry of usa would probably double if these high quotas were not given to china/india.
if the corporate establishment decide to pull the pin on american stockmarket, millions will go from weathy+employed to opposite.
on anniversary of sept 11 chicago futures finished days trading on 911.00
you still dont think the stockmarket is controlled after finding that out.http://www.infowars.com/print/Sept11/911nylotto.htm
House prices won't crash...simple supply/demand. They might drop a little, but will come straight back up. Whilst there's still people needing a roof over their heads, they'll either buy or rent...if they can't afford to buy, capitalists with $$$ WILL buy, and rent to those without $$$.
If you're worried about the future for your kids to have a roof over their head, you can still buy (liveable) homes in Aus for <$80k. If you can rent them for $100p/w you'll cover the mortgage, and in 20yrs own it outright, it might be worth between 5 & 20 times what you bought it for, which means very little because of inflation, but it's an asset that you can sell, or pass on to kids, and it hasn't cost you anything (maybe a little?).
I don't have any shares, but with the current EDT, my house has dropped in value around 10%...it's still worth a fair bit more than what I paid for it. My point being, apart from gold, property has performed better than other investments through all of this, and will continue to.
Yes, but you're missing a BIG part of the picture. Sure it may be as simple as supply/demand but supply and demand aren't so simple!
Just because a house is as you said a necessity, that does not imply that prices are always going to be stable or have an upwards trend.
Look at the US financial institutions. They had this invincible attitude upon in which they lent under the premise that their collateral (housing) would appreciate so much that it would virtually offset the high default risk of their borrowers (re: GFC). The availability of such loans would obviously have contributed to the inflated house-prices as well in the first place.
Here in Sydney Metro it's tough to find an OK place to rent for under 400p/w for 2 people.
There are MASSIVE vacancy rates in small units in all my surrounding suburbs - mind you these only seem to be in units and smaller houses. Even so rent is still too high.
We're trying to sell our house now - in a fairly upmarket Sydney suburb. There is no doubt that the market is more lethargic than when we bought 7 years ago when we had to compete with offers.
How about the fundamentals? Are Australian incomes rising as quickly as house prices put out... no. However a lot of demand is from foreigners.
In the end remember that a large proportion of the statistics we get come from REAL ESTATE companies. There IS a massive bias in almost every figure they put out (just ask any of my econ lecturers at uni).
From the (attainable)sale vs. buying price of our house over the last 7 years, the average appreciation per year has been 3-3.5% compound, so just about the inflation target - and I think a smidgen about average actual inflation.
supply and demand it is for sure.
but no-one so far has factored in what makes the bubble burst. and that is oversupply of second hand properties. ie. america gfc.
i'm not calling it either way but if interest rates go too high people WILL default and fire sale there house/houses which will create an oversupply.
the problem the reserve bank has is that unemployment records are flawed. they do not take into account all of the people who took reduced hours/pay to keep their jobs. and these people are mostly in the middle to upper class.
time will tell i guess. values are still going up in my area and as history tells us market reset from time to time. every market in australia has reset except the housing market.
Sure there is demand - in many cases for you need to park in the opposite street to get to auctions in melbourne...
....but how are people affording it? Is it sheep mentality?
What type and income are the majority of new aussies (ie "the demand") pulling?
Don't these guys have any hobbies that require "moderate" financial commitment?*
*disclaimer - I haven't bought new windsurfing gear in 2 years
I'd rather own something i can physically see and touch than having some cowboy playing around with my money.
Well maybe I'm on my own here but I hope they do crash.
I'm an above average income earner who can't afford to buy an average house in Perth.
(And I don't have a new car on H/P, or a plasma, and I don't want a 5x2 with theatre and games and enclosed outdoor area and aircon and... and...)
Bl00dy baby boomers and the tax office rules made housing which should be an affordable right into an investment for the rich.
If investment in food production was a tax write-off and the price of food doubled in 5yrs there would be an outcry.
Food, water and shelter are the undeniable needs of all humans - and in Oz the latter is for the rich now.
No Mark, you're not on your own (well, maybe not crash, but stop going up to ridiculous levels). I think it's poor that a country as big as Australia has a 'shortage' of land. Surely it is just the rate at which they release it that is the reason the prices are held high.
Even Sydney, where I live, it is argued to be running out of land... you've got to be joking, there's heaps, and if the government invested in decent rail connections and freeways to new areas there would be a lot more accessible from the city.
I once suggested in a lunch time work discussion that I think negative gearing on housing should be slowly reduced/phased out; I got a lot of people angry.
Maybe if they made it only applicable to new housing they could encourage new building without the need to inflate the cost of existing housing.
Just for the record, I also negative gear a house, but I still don't think its the right thing for an economy to do with its housing.
im intrested in what Mark said, if you earn over the average wage why cant you buy a house in Perth? The first house I bought was no where close to where I wanted to live, but after 2 subsequent homes we are getting closer to the beach all the time.
The demand is obvious - we all need a roof.
At the bottom end of the market, the marginal cost of supply is set by new land and house package releases on the fringes.
To the extent that this release is constrained, then prices will rise to above what the simple supply economics would imply, all other things equal. The current debate on house prices has a large focus on this as a cause.
If we had faster land release, and fully withdrew the first home owner's subsidy, then there could be a step down in prices at the lower end of the market (unlikely in Perth, IMHO, fasten seatbelts).
I reckon Rockingham is a great place to buy a house. Interesting coast WITH WAVES, close to the jobs epicentre in Kwinana, on the trainline (or freeway for off peak). You can wear your uggies down the shops... 
You can get in for less than $350K - plus you've got a high chance of doing REALLY well over the next 20 years (Cisco is right, buy four).
Just make sure your 20 year investment isn't close to where a possible sea level rise is going to wash it away. And hopefully Ken Henry won't move the goal posts on us all.
weve got 2 brick n mortars but from now on its stocks. property is great but its also nice to have some liquid and appreciating assets with equity.
ive seen 2 property corrections in the last 10 years in 2 different areas. keep in mind property is a locally fluctuating asset and can not be generalised, just like the stock market. theres stock that out did the all ords in every correction. mind you it helps the mrs is a certified stock trader.
yeah stock market is great, check out
EXT from the past 12 months to see the potential returns if you do your research... .80c to 8.30 (topped out at 11.45) and will prob be a 20+ dollar stock in several years time for those that are long term holders.
cdu another one has gone from november last year of 1.00 to 5.70
cfu from 5 cents to 27 cents, qmn from 5 cents to 42 cents
kcn from 2.60 to 9.70
buy when everyone is selling seemed to work...
no bubble in house prices , but market distortions are there, time will tell if we get a correction in some locations , supply and demand can go out the window in asset bubbles as its all demand driven.
you guys have gotta be ****ting me,
that would be the lovely stock market that robbed everyone of thier super funds ?
Yeah that's the one Gestalt. The same one our local council blew millions of ratepayers dollars in by investing the money in derivatives.
Didn't anybody watch "The Ascent of Money" on ABC or SBS???
Money is not lost or gained on the share market until it is crystallised. The share price is a combination of true value and perceived value. In a boom or bull market, the perceived value is high, and as soon as a lot of investors start selling the shares, the perceived value will decrease in turn.
I find Perth house prices hard to understand... In one camp there is the people who say that Gorgon (plus other resources projects) will keep things on the up and up... In another camp (which seems to have more tent space), there are some finance writers saying China is experiencing its own bubble, and look out for the 2011 crash...
Consider how much of the demand conditional upon the area and size of home is based on 'the need for a roof over my head' - this has nothing to do with creating a bubble.
What creates a bubble is when people begin to speculate on how much they can afford to pay per month based on income, how many years are they prepared to enslave themselves to a mortgage, how much they expect the house to appreciate in the next x years, that negative gearing will still be around in x years time, that the govt will keep giving out 1st home buyers grants etc.
Then you think that the sale price which affects the yield and the hence the initial price is also based on the same evaluation and it can be tricky.
When any one of these assumptions/speculations is not realised then you have a change in demand because the benefit of owning a house will change. This is why it is worrying if house prices increase by an amount much larger than incomes - it suggests that the market my be behaving irrationally and that the price of a house differs from it's 'fundamental value'.
With shares at least in theory it is quantifiable as a discounted stream of future cash flows, but with houses there is a lot more subjectivity involved even at the theoretical level, but the idea is the same.
I think I'm going to buy myself a boat to live on... screw the mortgage.
