1) As long as rates stay below 8-9%, business as usual. Above that and prices to start to come under pressure - especially the FHB segment as we saw in early 2008. However, if a shift to high interest rates is commensurate with an inflation break-out, then nominal prices will still continue to rise.
2) Not required.
3)/4) Not required as if more dwellings are built median can stay steady/fall without effecting value of existing property.
5) Unless there were massive tax increases, non issue. Bracket creep etc which is the usual method to increase taxes happens slowly and will not impact housing market materially.
6) Will always be available as we are small fish in the global capital pond, as we don't actually need that much anyway (Check APRA stats)
7) No - lower $AU provides even better value for o/s investors and returning ex-pats so pushes prices UP
8) Yes
9) This is Australia - it's the great Australian dream!
10) Yes
11) Well something is going on in China that's for sure! But yes the AU economy is linked heavily to the China story.
So in summary, the only things that could trigger a big housing correction IMO from here are:
1) Shift from low interest rate environment long term to a high one (10%+), without corresponding high inflation (highly unlikely scenario)
2) A GFC Mark 2
3) Banks significantly tighten lending criteria and tighten credit availability across the board (probably would only happen ig\f there was GFCII)
4) China collapses and takes the AU economy down into deep recession with it.
I think the above summary represents the true risks.
Any year with flat-ish or mildly falling prices is a correction in real terms and/or nominal terms.
Cheers,
Beej
Thanks Beej for taking the time to respond. It is appreciated even if we do not agree on all aspects of the property market.
1) Disagree, if interest rates were to go back to 8-9% I believe that a lot of the first rung on the property ladder (current FHB) will suffer mortgage stress and a larger than normal would default. 9% IR's would see approx a 40% increase in property payment for those that bought last year. Please look at the current debt to household income ratios. 10% IR's and property wont be a priority, supporting business that employee people will. This country like many others is way to dependant on property increasing every year.
Even the current increases have people screaming. It was the FHB + FHVG that was part of this latest property price rise.
2) If not necessary, why was the FHBG necessary in the first place if the market is robust. Sounds like a ponzi, smells like a ponzi, is a ponzi.
3,4) Adequare town planning and local council more willing to allow development is necessary to add to supply. Making develops release land or pay a tax will add to the supply also.
Your response doesn't make sense, adding to the supply equal to population increases will result in existing properties seeing price declines.
5) Increases taxes will slowly eat away at disposable income effecting not only housing but also retail and many other markets that employee people. Have to pay back the govnuts debt somehow.
6) Ok believe what you will.
7) Fanatastic, sell out a basic need of future generations so the ponzi scheme can keep going. Gee, mothers now have to work to provide a home, why not send the children out to work as well.
8) You better go inform the share market that all is well.
9,10) While lending has been free and easy and credit cheap. What was that credit crunch thing that just happended and required the majority of world leaders to cooperate or else hell might have frozen over.
Dream, thats what the Aboriginals thought before white man arrived. All things can change and will, it is just a matter of time.
11) We agree
Response to your points
1) I am unable to predict what will happen in the future but I hope we do not go down the path of Japan and the US will almost 0% interest rates, as it is a failed concept.
2) Soon to arrive some time later this year, early next at the shock of the govnuts who think all is ok.
3) Slowly happening, no or reduced availability of low doc loans, Westpac moving from 95% LVR's to 87%. Banks increasing rates above the RBA.
4) That is a big question, but I think the knock on effect will be the result of the dying empire, The USA.
Cheers