Alan Collett

Interesting article from yesterday's (17/08/2002) copy of the Australian Financial Review re property prices in Melbourne's suburbs:
http://afr.com/property/2002/08/17/FFXIDIQZW4D.html

Also this one on price rises in Melbourne, Sydney and Brisbane:
http://afr.com/property/2002/08/17/FFXS887ZW4D.html

Probably of interest to some.

Best regards.

shaun/lor

[very intresting alan thanks for that info, we managed to find abuyer for our house in uk so hpfully we will be in oz market soon shaun

willywh3r3

If housing prices get higher and higher, how can the local people get the money when jobs are scarce?

Or, is the Australian economy is at its best? This is the case when the economy is good, housing price is up. But when people speculate, this is what can contribute to disaster. You know, like dot.com crash. Housing price is up, but it is not followed with real increase in people income. People end up having more and more debt, until..... property market crash when people cannot even afford to have mortgage. Many people suffer because the house value is below the mortgage value. And you know what, the bank doesn't care about that, it will ask you to pay the difference in value between the mortgage and the current house value. Well, when time is good and you make your asset increase in value, you don't care either to share the profit to the bank who gives you the money to buy your house. When time is bad, it's payback time.

That is what happened in many other countries.

Alan Collett

Yours is a good point Willy.

A major driver with house prices is almost certainly people seeing property investment as a one-way bet (which it probably is over time - or at least the last 25 years in the UK and Australia). In Australia this belief is fuelled by the availability of tax deductions for interest paid on investments such as real estate - in other words you can offset the interest on the borrowing against your other income, obtaining tax relief on the interest at up to 48.5%.

However, in certain areas in Australia we are now seeing an oversupply of rental properties (which is mirroring the situation in the UK in many regards) - as interest rates start to rise (which I feel sure they will over the next 18 months as the global economy starts to recover) the cost of property can be expected to fall as borrowing becomes less affordable.

And of course the challenge for those in charge is to make sure the price of real estate doesn't fall off a cliff as interest rates tick upwards.

What interests me (pardon the pun) is the apparent absence of any notable wealth effect thus far in the consumer markets of the UK or Australia, whereby people spend and borrow freely on the basis of the ever increasing equity in their properties. Rather, it seems that the lack of faith in pension funds and the decline in Stock Market investment returns is making many look to real estate as an investment alternative, with the equity in their main residence used as a basis for investment in the property market.

Anyway, that's my two cents worth on the subject ...

Best regards.

willywh3r3

Don't expect too much for the authority to control this. Hong Kong property price has dropped by 50%. Many people preferred to declare bankrupt, live on allowance, and have the house auctioned to paying the mortgage. This is real!

So, when is Australia going to realize that investing too much in propery can backfire everybody?

It's much better that the money be put in openning up business. This will create jobs, drive the economy, etc. Of course, if it does not work well, there you go your money. It's more risky.

Btw, is your house taxed? How much is property tax in Australia?

Rgrds,
Wil