Qantasflyer

Some posts here have missed the point. Yes it is technically true that "Chinese money" has driven up housing prices, but at least in recent years this has little to do with the number of Chinese immigrants in Australia. Rather, it is the money of Chinese INVESTORS (big difference), funded by excessively generous state loans back home which have contributed to the 'housing bubble' of late. I am no expert in economics, but when housing prices are increasing out of whack with average growths in Australian household incomes - something is clearly wrong.

The dramatic rise in housing prices are exacerbated by the Rudd Government's policy change on foreign investment. Previously you were only able to buy off-the-plan if you were a foreigner, ie not an Australian citizen or PR. Last year's legislative change meant that anyone is able to buy established property, PR or not. Yet there is no evidence to show that immigration growth has experienced significant growth in recent years. The policy change in foreign investment is IMO fundamentally market distorting, and no doubt contributes to a shortage of housing for people who actually want to own and live in their properties.

mohogony

California is bankrupt and in deep recession and they have a knuckelhead Terminator as Governer, while the OZ economy in booming.

fish.01

Someone else mentioned you still had to be a temporary resident of 12 months standing. Is this not true?

coolshadows

That's California...it's different here. The property market is fool proof.

Lord_Farquar

California's economy was booming only a few years ago.

ABCDiamond

An article in 2006, 4 years ago..

and now in 2010

The way the housing market works in the US is the main difference between Australia and the US, and it is very different.

fish.01

My response was about whether we had had a housing shortage for decades as stated by another poster....I didn't think the 90's had that issue at all......I can certainly see why a stronger case could be mounted for it now given the record number of immigrants and birth rate vs high cost of developing new land due to dramatically increased govt charges (compared to previous decades) and the govt push to high density rather than sprawl.

I can also see the case for "where did all the demand go" when a bubble bursts.....but I don't think the fact that both of these two options (real unmet demand keeping prices strong and false demand due to developer lobbying) have played out elsewhere in the past proves which is true here and now.....though they should both certainty be taken as a warning.

Discussion of the underlying facts seems the most useful in teasing out the truth for this particular situation...I love reading about the facts, some posters continuous rhetoric laced with definitive "truths" are boring and useless IMO....love ABC and his factual approach. I wish all sides of the debate followed this line so I could learn something and make up my own mind but I guess you're not all putting this show on just for me and people who think like me so carry on

I selfishly hope we have a bubble and that it bursts big time soon...but on my current known facts, and the balance of probabilities, I believe we will probably have a soft landing and then flat prices unless something dramatic happens in China that kills our economy. Unfortunately I have no idea whether I am right or not. But then I guess the rest of you don't either.

pomtastic

Aye, Californian is the world's 6th largest economy. Ireland had a 'tiger' economy that was deemed unstoppable. You have just got to hope and pray China keeps on growing at the rate it is or it's party over in Aus.

Lord_Farquar

High rates of borrowing during boom periods doesn't seem that different to me.

ABCDiamond

It may not be fool proof, but it is a lot different.

In the US, people were buying houses intent on values rising, when they dropped, the owners walked away from the houses, and their mortgages, leaving the banks with a massive problem.

In Australia, the house owners can't do that, as they still have to repay the bank. Consequently very few people will just walk away, and wash their hands till the next time.

That is where it is really different.

Think about it, if you could get a 100% mortgage to buy a really good house, knowing that prices were going up, and you would make a killing financially in a few years time, would you not take the opportunity ?

Here we may be a bit nervous ... what if prices dropped ?

In the US, if prices dropped, you lose nothing. And they did drop, and people walked away from their debts, they will buy again when prices are at the bottom.

It was case of everything to gain, and nothing to lose for many people. But the banks got bitten.

ABCDiamond

That isn't the difference, see my last post.

pomtastic

Recourse and non recourse loans, whatever. Fact is, Aus housing is now the most overpriced in the world.

Have a look at the comments on news.com and other news related websites on housing and related issues. The general Aussie public are now waking up to the fact how overpriced housing is. The Govt is realisng sentiment is changing, hence the new 'population minister' and inquiries into foreigners buying up housing. Once the herd turn, then it's all over for Aussie Real Estate.

pomtastic

You are right Lord_Faquar, all asset bubbles are caused by lax lending, Aus included. Aus has the highest personal debt ratios in the world.

coolshadows

I have to agree with that. I think the biggest issue for Australia would be re-possessions, with home owners failing to meet repayments.

coolshadows

"[Housing bubbles] in their late stages, they are typically characterized by rapid increases in the valuations of real property"