IndieG

Where did you get that information from? You're talking as if there are millions of people in Australia who have money coming out their ears and simply can't wait to buy houses at the slightest downturn. If house prices fall then Banks might get even more choosy about their borrowers, might increase margin requirements etc. Without cheap and easy credit there is no support for the ponzi market (unless of course the Govt. throws away billions more in first home buyer grants). Further, interest rate increases (independent of RBA and quite likely due to pricing pressures on their wholesale funding) could also dampen the enthusiasm of punters to take on even more debt.

The biggest risks to house prices here imho are decreasing credit availability, higher interest rates and increasing unemployment. The first two appear to be more and more likely, not sure about the third.

Weebie

I agree,

The slightest fall will push loads of buyers into the market. If you can't afford now you probably never will.

Weebie

The mentality here is so much more intense than Britain. I personally know someone who fasttracked his marriage with soem girl he met just so he could enter the property market.

Prices may drop but there iwll be no buble. ALso the salaries are mich higher than England and the cities are big as it is.

Alfresco

I agree. I wasn't being serious, just hopeful.

Catch

very basic but very true,seems the attituide is even changing on here,no doubt a resident landlord will be along soon with some reassurance

bra_boy

Everybody knows that house prices can't fall while banks are willing to lend. I am going to sit it out until the banks get nervous. My bank pays me 6.8% interest, so I live rent-free and save a bit too.

If house prices rise by 5%, I will have to lower my sights, but I can still buy something, hopefully. If house prices fall, I can get something better. I think prices will fall. Who knows when? I was living in Singapore when the housing market collapsed in the late 1990s. Rents fell by half almost overnight. Nobody, including me, saw it coming.

The smart money has already got out of the market. Everybody else is waiting for the next boat from China, which will hold things up for a while.

PMV

Irish property is now valued at 2002 prices, and falling. Anyone who bought in the last 7 years there paid more than their property is worth. And even those who bought 8+ years ago, may, just about breakeven on selling. But that is of course if can find anyone who is actually able to get a mortgage.

Of course the Australian situation is very different, but it can happen that even those in it for the medium to long term lose out (not just those trying to make a quick buck), and end up stuck with a house that they can't sell or rent.

ABCDiamond

Some parts of Australia are actually very similar. Western Sydney for example is also about the same as it was back in 2002, and maybe even a bit less.

BristolBeary

That's not quite true though - google will verify that

Whether people like it or not prices inflate over time. Down a bit, down more, then up etc.

So much depends on a persons situation. I could spend $260,000 on rent for 10 years or pay off a mortgage with that money instead? One I have an asset at the end the other nought. It's not rocket science.

But I appreciate that other people may not see it that way because they may not be on the housing ladder the one reason or another. I know people who were telling me to wait in 2000 because prices would crash in the UK - there still waiting! They could of brought and made in roads into a mortgage by now.

It's also emotional for me and my family - we like to own our own house and do what we like with it, more to life than worrying about the price of a house in my opinion.

PMV

Ok, it's probably more like 2000 prices in Ireland then!! (actually I'm not sure what you meant by the google comment? Did you mean that house prices aren 't 2002 prices in Ireland? Or something else?)

Unfortunately there are many people I know stuck with property that they bought to live in, but for various reasons (relocating, growing family size etc) they now wish to move out of the property they own. They can't sell due no buyers/negative equity. And the rental market has bottomed out in many commuter towns so it's not possible to rent out the house either, leaving many stuck with an "asset"/ "liability" that they just can't get rid of.

If you are lucky enough to be able to afford your first home to be a family sized home with your life long partner in the area that you want to live in for the rest of your life, then happy days. Falling/rising house prices won't affect you.

But if something changes along the way after you buy your first dream home .. you get married/divorced/have kids/retire/relocate .. well you may just want to sell that asset/liability as it no longer suits what you need.

And then it will matter how the market is. It's not always true to say that a property will be worth more in 10 years time than you paid for it, leaving you with the option that you can just sell up and move on if your life situation changes.

So although I've been on both sides .. rented for years, and owned for years .. well I think there are pros and cons with both. And nothing is guaranteed.

NedKelly

I can't work out how anyone on the average salary can pay the rent and still have money left over to pay for food, car, insurance, fuel, electricity, clothes, beer and fags. And it's cheaper to rent let alone buy a place.

gumtree

Most people have misunderstanding with the calculation. Money spent on mortgage is far greater than money spent on rent and so there is opportunity cost (interest) for excess amount paid on mortgage payment over rental. $260,000 for total 10 years' payment at 7% interest rate = $186,000 loan amount and $2160 monthly payment (P+I). $186,000 house value (assuming no down payment to make it simple) = $2160 monthly mortgage payment but not monthly rent (far less). People can only wish for capital gain to cover excess cost.

BristolBeary

I'm no expert on economics! I'm not trying to lay claim to how the evil monster that is house prices works, I can only comment from my experience.

You can google to get results from countless sources on what house prices were and are now etc. For everyone that is doom and gloom there is one painting a better picture.

Which is correct? According to results I seen my house I sold last year in UK was worth 10% more as I brought it for in Q4 2002. Luckily for me that is complete rubbish, I actually sold it for 50% more.

I think we can all agree house price inflation is bad. We don't go into the petrol station and go oh look the prices are up 10% - bonus!

With regards in whether its best to rent/buy, the way I look at it is my mortgage is the same as what I pay in rent now on a monthly basis. When its paid I own it and don't have to pay any mortgage/rent ever again!.

Hopefully saving myself 40 years+ if rent

Or am I missing something?

ABCDiamond

Can you calculate, using your figures, the following:

20 year old paying rent of $300 pw rising at 2.5% each year, for 50 years
compared to
20 year old paying mortgage of $600 pw average for 25 years.

The one main advantage I see, is no rent or mortgage payments from age 50 for me

IvanM

And lots of potential supply around that area as well.

The article writer has an issue with the amount of overseas money used to finance the current mortgage market. The question is whether that money will be available at current prices on an ongoing basis. Bear in mind there is still a lot of refinancing of bank debt in Europe and the US, which will compete for the money financing Australian mortgages. This is the final phase of the GFC.

For price increases in Australia look to where there is a supply constraint, especially near public transport.