It’s tempting to make this week a ‘Property Week’ in Money Morning.
We weren’t surprised to see the Money Morning mailbag bursting at the seams here at the Old Hat Factory yesterday.
Within minutes of yesterday’s email going out the replies started flooding in.
Perhaps the most remarkable response was from the property bulls.
Look, let’s be fair about it. When we asked on Friday if readers had authentic research to back up the ‘housing shortage’ claim, it was probably the busiest day of the week for property bulls.
After all, there’s all those ‘open for inspections’ to prepare for over the weekend.
So it’s not surprising that we received less than a handful of emails from property bulls, offering opinion – which is fine – rather than the real evidence for a housing shortage.
We’ve no problem with people expressing opinions – we’ve done that once or twice ourselves.
But roll forward to yesterday and ‘BANG!’ The property bulls have woken from slumber. The responses were enough to split the Money Morning mailbag.
Unfortunately, there was a distinct lack of hard evidence in the responses. In fact it was the usual stuff – not enough houses being built, too many immigrants, not enough ‘quality’ housing.
So, rather than getting into a “yes there is, no there isn’t” argument, we should probably follow the lead of Money Morning reader Jason:
“The resilience, stupidity and arrogance of the ‘property’ crowd is incredible. I no longer even entertain them with a discussion any more. When I hear them say ‘Property prices always double every 7 yrs’ or ‘Housing shortage’, I reply with. ‘ I completely agree now is the perfect time to buy a house, I’d get in while it’s still cheap’.”
We couldn’t have put it better ourselves. Hats off to Jason.
But despite Jason’s example, we will stick with property for today. But we’ll take a slightly different tack.
Regularly we receive emails into the Money Morning mailbag asking us for advice on whether the reader should buy a home now, or sell their home now.
Our response is always the same – no response. That’s because unfortunately our licence prohibits us from offering personal financial advice. All we can do is keep things nice and general in these emails.
But the reader emails do have a striking similarity. Almost always – when asking if they should buy – the phrasing is the same: “I can borrow $500,000″ or “I can borrow $700,000.”
We don’t recall ever seeing an email that states, “We’ve seen a nice house in X suburb, with three bedrooms. It’s a nice area and the price is $450,000. Do you think we should buy it?”
Obviously, our non-answer would still be the same.
For all the talk about property being excellent value and a great long term investment, we’ll make a bold claim – that property buyers actually don’t have any interest in the property they’re buying.
In fact, I’d go so far as to say that property buyers are not buying property at all.
Rather, they are ‘buying’ a loan and using the house as security.
Why would we make such a claim? And what point are we trying to make?
Well, it just seems that the actual house is a secondary consideration. Sure, we see plenty of comments about a lack of ‘quality’ properties, but as soon as the property loses its ‘quality’ it seems to become a ‘renovator’s delight’ or a ‘demolition job.’
Then even though it’s only land value, the price of the land suddenly becomes the value of adjacent properties less the cost of building a new house. That may be obvious, but is it logical?
But back to the buying ‘psyche’ for a moment. The fact that property buyers see property as an investment rather than a dwelling is precisely the reason why there will be a property price crash.
It’s no different to the stock market. If investors were always rational and approached the buying of shares as though they were buying the whole company, then share prices would be unlikely to rise to such extreme levels.
But that’s just how a market works. Speculators add liquidity to the stockmarket through buying and selling. They don’t buy because they believe the company has strong cash flows or because they like the net profit after tax forecasts. They buy because they believe the price will rise – nothing more, nothing less.
Property investing is the same. Many people buy a house because they want to live in it, and because they prefer ownership to renting.
However, more and more, property buyers and home owners have been brainwashed by the ‘location, location, location’ mantra. They are buying not because they want a place to live, but because they believe the price/value will rise. They buy not because it is close to the train station for their own benefit but because they are told it will ‘add value’ when they sell.
They don’t buy because it is close to the shops, but because it will ‘add value’ when they sell. Even though the buyers are just as likely to drive a car to the station or the shops. But that doesn’t matter, it’s all part of the ‘location.’
Take a look at this brief news story from News Ltd: “The average price of a Sydney home could rise by $100,000 in the next two years, according to an [property] investment group.”
The article states, you guessed it, “A shortage of homes and a growth in population will cause the property boom.”
See what we mean? Not a single mention of an actual property or a type of property, or the benefits of owning rather than renting, purely that the price will go up because there isn’t enough supply and too many immigrants.
As I mentioned above, property buyers are not buying homes or houses any more. They are taking out the biggest possible loan to buy the most expensive property they can, because, well, the more you leverage the bigger your returns.
Why buy a $200,000 loan against a house that will only be worth $400,000 in ten years after it doubles, when you can buy a $400,000 loan against a house that will be worth $800,000 when it doubles in ten years?
As for the other issue I mentioned above about land value, look, your editor is aware there are economic studies and theories that could fill entire libraries on the subject of land and rent. So we’ll state here up front that we have no intention of competing against such learned thought.
We’ll just write what’s on our mind, whether it’s right or wrong.
So what we say is this. Why, for example, should the land value in Richmond be X times greater than the land value in Dandenong?
What extra value does the land in Richmond have that the land in Dandenong does not?
The cost of building a home on the land should be the same.
Of course, the simple answers could be that land in Richmond is more desirable than land in Dandenong. That inner city types typically have more disposable income than outer suburban types and therefore they can bid the price up higher.
But is the land any more useful or productive in Richmond than the land in Dandenong?
Here’s our point. A house in Richmond is no more productive to the economy than a house in Dandenong. Yet it is X times more expensive, and most probably requires a debt that much larger.
So, the only things that can have driven the price is supply, demand and price. Which brings us to the final point. How reliable is price as an indicator of supply and demand?
This is perhaps the real reason the property market and property prices have taken off.
One of the comments we regularly receive is that: “There must be a shortage of houses because house prices have gone up. If there was a surplus of housing then prices would fall. Simple as that.”
Well, it’s not quite that simple. Let’s use an analogy to make our point and round things off for today…
Imagine that someone announced, “There is a shortage of apples, buy apples now.”
And then assume many people started saying it, almost every day. It would most likely have an impact on the price of apples.
You could quickly go to the local orchard and buy apples from the apple grower and he may charge you 50 cents, because that’s the current market price.
The apple grower is happy because business has been slow so he’ll sell them for 50 cents each. But then he notices an increase in business. More people are going to buy apples from him.
Within days queues are forming at the orchard door. The apple grower realizes he can charge extra because of the demand. So he raises the price to $1. But there is still demand because people believe there is an apple shortage.
So the apple grower raises the price further to $2. There is still demand… but not quite as much. But the apple grower doesn’t notice the queues are getting shorter, or if he does he doesn’t care because he’s making four-times as much money as he used to for the same apples.
So he cranks up apple growing production.
Eventually, the apple grower takes a look at the millions of apples that he has in the barn and works out if he can charge just an extra 20 cents he will be a multi-millionaire, so he raises the price to $2.20.
Unfortunately for him, when he opens the barn door, all the buyers are able to look inside and see there is not an apple shortage at all. There is an apple surplus. Buyers no longer feel have the same urgency to pay $2 per apple.
They figure the apple grower will need to lower his price to get rid of all the stock. The buyers are happy to come back tomorrow to see if they’re cheaper.
The price of apples plummets.
You see, supply, demand and price do not necessarily mean that all three are at the correct level. Levels or supply, demand and price change all the time. Therefore, just because prices are high it does not necessarily mean there is a shortage of supply.
Sometimes it is just the belief that there is a shortage which creates the high prices. And can you blame the majority of people for thinking there is a housing shortage?
Of course you can’t. Not when you read day after day in the mainstream press news items telling you there is a housing shortage, and telling you there are too many immigrants who are buying up all the property they can eat.
In summary, there is no difference between the application of supply, demand and price in the housing market to its application in any other market.
Strip away the distortions and the untruths about a shortage of property and the whole thing crashes around your ankles…
Of course, we could be wrong, and house prices could continue rising forever!
Other Stuff on the Markets
The S&P/ASX200 jumped 3.16% yesterday, while overnight on Wall Street the Dow Jones Industrial Average added 3 points. In Europe the FTSE100 gained 0.93% and the CAC40 added 1.01%.
The price of gold in Australian dollars is trading at $1,127.69, while in US Dollars it is trading at $943.42.
The Aussie dollar remained steady versus the US dollar and Japanese Yen, trading at USD$0.8375, and JPY79.23.
Crude oil closed overnight at USD$73.88.
For the biggest movers on the market yesterday click here…
{ 20 comments… read them below or add one }
Dear Kris,
I fully agree with your analysis of investing in property. I have invested in it since I was 18, some 30 years now. I leaned several simple sessons when buying property.
1) Have at least 20% deposit to start.
2) value a property roughly 10 times the expected rent.
3) pay one off before you buy on the next property (Rent from first plus rent from second makes paying off second loan faster.) then move onto third…etc
As for theory of “houses will double in X years” from now is nonsense because who will afford to buy them? wages will need to increase accordingly, (good luck on that one.) Why todays prices I feel are too high is that rents are not keeping up with the 10 times theory. There is definately not adequate return for the investment. Add in sales tax/agents commission/legal fees when buying and selling/interest paid and then see how much is left. Negative gearing is also a waste of time. If you are paying a lot of tax, celebrate, because it means you are making money. These “spin doctors” who show you examples of people accumulating 20 properties in 3 years and retiring is total deception. In 30 years I’ve never achieved it! All this may have woked in the past 30 or so years but we are in different times now, and the past is not a true indicator of what lies ahead and relying on it could bring a lot of people down very soon. Real estate is no longer the investment it once was. Don’t be fooled.
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&
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Dear Kris
In regards to the myth that property prices double every 7 years, it only takes some simple maths to prove this is not the case: (Final Value) = (Initial Value) x (1.10)^years. Even for Australia, if a property was $100 only 120 years ago then at 10% per annum, this would equate to $9.27 million dollars today. House prices appear to double roughly every 16 years assuming 1-2% growth above CPI (which appears to be the case).
Property prices are way over-values here in Australia and I don’t expect a correction to be far away. Even on a $500,000 house that falls 5%/year over 3 years leave you with a property worth $430,000. A $70,000 loss not including all the interest paid on the loan. Things are going to get messy.
Keep up the great articles.
Interesting points Kris, some I agree with and some I don’t and the biggest agreement I have is actually a negative against your whole story because YES Property Buyers do See Property as an Investment…they MUST if they want it to be a successful investment.
I have bought a number of properties without seeing them (by using property buyers and friends) and have used sound business principles and dare I say it ‘location, location, location’ has been fundamentally important to why they have all greatly increased in value. Any investment you purchase must be operated like a business looking at the cashflow of the business (rent v mortgage payments) and increase in value (property appreciation due to numerous factors)
Any business a person invests in does hinge greatly on supply and demand but I think your apples analogy is a poor one because you choose a commodity that people can easily live without and has no emotion in purchasing or living without. Purchasing a house or a home (yes big emotional difference in these 2 purchasing action) is not just the largest financial decision in a persons life its also a purchase that effects where the purchaser family will live, how close they are to other family, are the next to the right school etc
I think the the point you are trying to make is that so many property investors use zero skill or intelligence and use blind faith that property will continue to double in value every 7 years. Whether it will or won’t is anyone’s guess but blindly purchasing any property with that ‘hope’ is not a clever investment strategy particularly if you buy a bigger property and get into even more debt you can manage on the downside.
As for the supply v demand…well I do subscribe to that theory for 2 reasons. 1. The number quite clearly show that building approvals and actual building our down whilst immigration remains high…bottom line there is a strong demand even if you don’t want to acknowledge their is under supply. I currently live in LA and have watched with great amusement how the US housing market has collapsed and there really are some amazing deals from a price perspective and rental cash flow…but property values are going to be down for a good few years.
2. I am also from the UK and have lived in Asia, Europe and as above now in the US. Fortunately I also spend over 12 years in the beautiful country of Australia and quite frankly there is no where else in the world with the great balance of lifestyle, weather and fantastic people. I don’t know how many people apply to come to Australia each year but it wouldn’t surprise me if it were over 1 million and if its not yet it will surely reach that level of demand to escape their own world and come to the ‘lucky’ country down under.
As for Nicks comments above…if you have been buying real estate over the last 30 years and haven’t made a fortune you are unfortunately doing something wrong! I know a number of people who have bought 10’s of properties and one over 60 in 5 years and it all comes down to getting a formula correct. Sorry Nick I am not meaning to rubbish you but you yourself said property has doubled every 7 years for the past 30 years so you should be retired and long gone many years ago. Reading your strategy leads me to believe you are a very careful investor (which there is nothing wrong with) but your strategy was to pay off 1 property before you releveraged to others. That is not my strategy and I have bought multiple at the same time and all have done very well n being paid off and increasing in value.
Cheers
Marty
Hi Kris
I have been reading MM and the DR daily for most of 2009.
Recently you have made two points that strike me as very interesting, primarily due to the possible interaction of these issues:
1) There is no housing shortage. On this I agree, the spruikers have exaggerated the shortage to suit their own book. But I believe there could be one in the future…
2) The CBA is heavily exposed the residential mortgage market and if there is sharp decline in house prices, the risk they have taken on is dangerous. They would love there to be a shortage of housing, as this would lessen any price declines when the bubble bursts.
So here is the concern – If all of the Australian banks are heavily loaded up with residential mortgages – and a shortage of houses truly would limit and declines in house prices, then isn’t it entirely feasible that the banks could tacitly collude and refuse to finance new property developments?
From what I hear this is occurring – mainly due to the fact that we are in a credit squeeze and developers are being asked to provide pre-sales on these developments to get finance. But if the CBA are willing to lend 500K to your average 26 year old young couple to buy an existing home, then why won’t they fund new property developments?
IT seems to me that the big banks in Oz would be keen to ensure Australia does have a shortage in housing. Due to their dominance of the banking sector – this means they also have the ability to ensure the housing shortage actually comes to fruition.
Do you think there is an issue here? Could the Banks choke off supply for financing housing construction in Australia to ensure that the value of the collateral for their loans is not diminished?
Thanks for any guidance you can give on this matter – keep up the good work mate!
Kris I accept that you will have your views and no doubt reasons for those views, but really you should make it more clearly known that every dollar invested in real estate is a dollar less invested in the stock market and that is where you make your dollars.
You have a vested interest in keeping real estate investment low, and people who visit this site should know that.
Hi all, this is my first posting here, so please bear with me.
I don’t know whether to be a bull, or a bear, about property in the short to medium term. The way I see it, it could easily go either way.
Therefore, in saying what follows is not meant to support either camp, but merely to point out nuances, strengths and weaknesses in Kris’s arguments.
1. Chief strength: Property prices cannot double every 7 or 10 years. To suppose otherwise is absurd.
2. The catch: The claim, while true, is jejune, trivial, and of not much use but the most unthinking and naive, and with no knoweledge of the meaning of compounding. This points us directly to the problem:
3. The weaknesses:
3.1 Kris’s arguments are aimed at strawmen property investors, as exemplified by his claim that the main or only reason for investing in property is the expectation that prices will go higher. This is incredibly naive, and could hardly be more off the mark where property investment psychology is concerned. If there is an interest, I will explain and elaborate.
3.2 Granted point 1 above, that prices cannot double every so many years, it does not follow that we will have a price crash. A clear alternative possibility is that we will have a long period of stagnation, and unless such an alternative is entertained, the price crash argument remains simplistic and wobbly, and it might explain why it fails to convince so many people.
3.3 Even if we are going to have a property crash at some point, it is completely useless to know this as a truth, unless we have some indication as to WHEN this is likely to occur. It is no better than saying that there will be a severe storm in Melbourne.
Well, duh. While you are at it, tell me something new. All prognostication, if it is of any use, needs to come with a pinch of adventure, and say something about timing.
Perhaps Kris might like to make a bet as well about where property prices are going to be in 1, 2, 5, and 10 years? That would make it really interesting. But without more substance to the argument, I see no reason for being either a bull, or a bear about property, even if Kris is right (as he seems to be) that there is no housing shortage in this country.
Cheers all.
Hey Nick,
That is fascinating. Would you mind telling us why after 30 years you are not making enough in rent to retire on, as your methodology would seem to imply that you should have by now a good, solid income stream from these investments. So, in your experience, what’s the catch?
And, if rental income is not so good, why aren’t you cashing in now? You sure must be sitting on very healthy capital gains by now.
Thanks and cheers.
An interesting analysis, but the assertion that people buy property primarily as a security for an investment loan simply sounds wrong and comes without evidence.
People buy for all sorts of reasons, alot of which are qualitative and difficult to plug into an economic theory. Home owners aren’t going to flog their houses as soon as the price starts dropping like they dumped their Babcock & Brown shares.
Good response Nick!
But the article itself didn’t clear up anything for me Kris, given what was written I would hope that you wrote that based on statistical facts rather than hunches (it felt as though you’ve written these based more on intuition than facts)
Maybe you can clear the following up for me and everyone else reading this.
1. if there’s no shortage of housing then what explains the skyrocketing rental prices? a surplus of rental houses surely would not produce higher rental prices.
3. as high as rental price is right now, people are coping with it, and people have been coping with high property/rental prices from singapore to hong kong to tokyo to new york, what makes Sydney and Melbourne different?
4. would you agree that as long as rental prices stay up high, property price cannot go down?
Thanks
James
I bet etch is a realo or a happy stick.
Kris,
I receive your e-mail and read it and discard it in most part. I think you are biased against property but the argument you ran with for this article warrants consideration. I do agree property investment is about finance, it is about leverage and using other peoples money to invest in capital growth assets. The reason I use property is because the banks will lend at higher ratios than they will against shares. It is the lenders who believe in asset class to lend against it. You are buying a loan, I agree.
You need to do it safely and securely and build in safety nets. Done well, you can build a property portfolio over time but we are talking 10 years and longer. My strategy for clients is to look at adding 1 property every 2 years or so to your portfolio.
The other benefit of the property market is that you will not suddenly be holding property with no value as you can do with shares. There is no intrinsic value in a share in itself, so having shares in a company like a Lehman Brothers (or many other listed companies) who overnight became worthless, the share itself is worthless. This does not happen with residential property, people still need to have a roof over their heads.
The volatility of the residential property market (as opposed to property trusts) is far lower than the share market.
Most of the property owners in Australia are home owners with a considerable percentage having outright ownership. They do not consider their property to be a tradeable asset. One of the reasons that property should not crash 40% or more is that the supply of houses on the market will not suddenly increase greater than demand. Many people have no reason to sell. Property investors only make up a small part of the overall market. You still need to be smart in where you are buying investment properties and what type just as you do with shares.
I read the property spruikers also and in most part discard what many claim, however a well structured strategy over time can build a successful property portfolio. It is a finance strategy.
Though I may not necessarily totally agree with all your points however most of your comments in relation to the decision process of a typical buyer are quite valid and in line with value investing principles.
As always we do appreciate commentators from both extreme sides of the spectrum- adds to the vitality of a forum and essential in the furthering of knowledge. Yes for all published data a scrutiny in relation to conflicts of interest should be essential- but also typically overlooked.
There’s no need to feel perturbed from contributing to contentious topics provided that it is done responsibly- RP Data can be somewhat abrasive in style and these things come with the territory amongst commentators. RP tend to impress people based on it’s resources, and complexity of methods- neither of which in its own right necessarily validate their conclusions drawn, however they do provide a valuable service to the public in disseminating a lot of interesting data and graphs. A lot of their comments were highly intelligent though can also be misleading at times so one would need to interprete the data in ways one would see fit to allow for some of the bias. Having said that on very minor occassions they did manage to convince me to alter my own views somewhat.
You can’t get comments or perspectives such as these published or broadcast in the mainstream media. But thats not surprising when you consider the amount of advertising revenue the property sector puts up. Why would you bite the hand that feeds you? Property, particularly housing has evolved into the holy grail and focus of nearly every Australian. It simply cannot be left to scrutiny of any sort which may cause the slightest trepidation amongst potential buyers which in turn will translate into a price decrease. This despite the evidence of the collapse in unsustainable lending practices and overvalued property prices being the main trigger for the GFC. Our stupid government at federal and state level are forcibly driving people toward it (obviously with the strong influence from the self interested housing, banking and real estate lobby groups) with any number of carrots – and praying that a big stick called interest rates doesn’t revisit as it did in the late eighties. Back then the average house loan was around $100K and the average house cost about $150K. Imagine having borrowed the average loan now of $400K when interest rates start ticking toward 8%? What happens if – as is highly likely – Australia’s status as a pissant economy requires that they go to 12% to attract money? And God help all you first home buyers if it gets back to 19% which is where it was in 1989/90. You will need to grind out close to $80 grand a year net just to pay your interest – not to pay off your loan. You better have a bloody good job and secure income. Don’t think it could possibly happen ever again? Ha ha! Have fun speculating in property over the next decade. You just enlisted in the biggest Ponzi scheme going around.
Hi Kris
Thank you for your well-considered analysis of Australia’s property market.
Anyone who believes supply is THE problem only has to check for their favourite suburb for available rentals on realestate.com.au…inner city or outer suburb, fashionable or otherwise makes no difference – there are hundreds available in each of them.
The problem therefore isn’t supply, it’s supply at a price that people are able to afford. And that’s not surprising – a landlord who has paid over the odds for their property (because “supply is short and rentals are in such demand”) will likely set their rent above what the market can pay (because that’s what they need to make their “investment” work).
And when the market can’t pay the rent, they sit empty…
Housing prices are corelated to the supply and demand of credit not the supply and demand of the accomodation, that housing provides.
Housing prices are corelated to the supply and demand of the price or cost credit in terms of interest rate.
Because lending to home buyers by financial institutions has been decoupled from the risk (of loss of bank capital) lending is not corelated to borrowers long term ability to pay.
Therefore my first policy initative would be to put all home mortgage borrowing in Australia on a ‘non recourse’ basis.
Dear Kris,
I love your provocative comments on residential housing.
It would appear that you are correct that ,in historical terms at least, there is a housing bubble in australia.
Your explanation in terms of supply and demand (the apple story ) and your response to the location, location, location mantra was a little disingenuous.
Of course land and houses are more valuable in richmond when compared to dandenong – that arguement will never stand up to any kind of reasonable analysis and you know it. People have many different wants and needs when it comes to choosing a locality to live in – so the location….. mantra holds up when you look at schools,transport,beaches and any number of factors. Then there are numerous intangibles … ie your potential neighbours, snob factors ect ect.
Having lived and invested in Perth for the past 20 years I have seen incredible volatility in house prices. I am deeply troubled that the median house price is now about 6 times the average yearly salary when historically it is around 3.5 and I am concerned that a large correction is just around the corner.However when you look at rental yields which are certainly much better now than they were just 10 years ago and you factor in population growth of over 3% per annum and the potential for another resource led economic boom ( leading to increased salaries ) there would actually also be a valid arguement for an actual boom in house prices here.
With a property in the suburb of claremont, where we saw drops of around 20% last year primarily I believe because of overleverage and the stockmarket crash, there has been a solid rise in the past 4 months and a change in sentiment that could see a return to boom prices very quickly.
So I guess the thrust of what I am trying to say is that with property it really is all location location location.
ps I haven’t even got into household size yet. 30 years ago there were 4.5 people per household and we are now trending down towards 2.
All this doesn’t mean that some poor sods that are mortgaged to the hilt, bought in an outer suburb of sydney, about to lose their jobs and rushed their decision because of the 1st home buyers aren’t going to get burn’t,
It just means that the residential housing market is way too complex for a one size approach and anyone taking on a loan for 7 or 8 times their salary should tread very cautiously.
All the best,
Tony
Australia has oodles of land, as far as the eye can see, so like you point out there is no fundamental reason for the huge differences in land prices accross suburbs, and this feeds nicely into your apples analogy.. our population is tiny, and our lands vast.. so how can there ever be a ’shortage’ in Australian housing ?? Indeed the whole concept of house valuations in this country defies logic and is inherently flawed and i believe most owners are living in a total fantasy land as to the real values of their homes. How can a small 2-bedroom inner city ‘apartment’ be priced higher than a larger 4 br home with land, in the outer suburbs ? Stupidity breeds a herd mentality .. this is one of the only countries in the world where you can buy a lovely country acreage at cheaper than an inner city ‘penthouse’ ! Go figure – I for one am selling my city house for $1M and then putting that money into a large country acreage, enjoying it, and then cashing it later for when the demand for more apple trees eventuates !
Dear Kris,
It doesnt matter what we think about property prices. So long as the system is protected it will continue.
Even if the average australian cannot afford an average home, we will still have overseas investors pushing up our prices. Investors from Hong Kong can buy australian properties at extremely low interest rates and receive positive cash flow from the rent alone.
If australian property were to tank, wouldn’t it have happened by now? It has in the UK and US. But not here. At the high end prices have already fallen substantially. From my perspective this was the extent of our housing crash.
I’m sorry but it doesn’t matter how many articles you write saying that property will fall, so long as those in power support the system, it will continue. I’m sure you’d love it if we had a property collapse and our banks went bankrupt as a result.
It takes about 10.4% p.a. growth for an asset to double every 7 years. Even if inflation is 3-4%, property only needs to do about 7% p.a. which I think our readers agree is reasonable. In many areas the return on buying a house is less than bank interest.
I eagerly await the day when our property prices crash and you can issue a big “I told you so”.
If this is all true which i for 1 believe how to we get the property prices back to realistic affordable levels?
The view i have is i can afford to buy (have been holding out for a colapse) but do i really want to pay half a million dollars for a house and land that in recent years was only 280-340,000 with the only thing that has changed is more peoples perception of the current market.
How do we correct this??????
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