The truth about the Australian housing market.

The truth about the australian housing market :

It's normal when property goes up by 100% in 2 years. Yet, when clear crash signs indicate
the prices will crash 50% , this somehow seems impossible and the end of the world. Why ?

"Houseprices always go up , they never go down" is the usual answer. And so they have done,
for the last decades. But not anymore. High oil prices, rising unemployment, inflation and
the subprime crisis are going to cause what should have been caused long before : A crash.

Usually, markets go up and down in a sinus-like wave. We have seen a boom in 1998-2000 with
the dot.net bubble, the bubble deflated and people who didn't sell before it deflated were
left with no savings. With housing , we're in a similar position nowadays, only the major
difference this time is that it isn't only savings, this time it's chokingly huge debt.
houseprices have gone up as far as they possibly could get for a lot of good reasons which
I won't explain to detail here. You can do your own research.

The risks are huge, and will soon become more than clear to a lot of households when their
lowest-ever 5-year-fixed mortgages will go up from 6% to 10% interest rates this september 2008.
This huge increase results in average monthly mortgage repayments increasing from 850$ to 2650$.

In september 2008 : 1.000.000 households will be in severe trouble. And this is just the start.

Be prepared and be afraid , this crash will dwarf the 1929 crash.

Agree 100000% mate!!! This post is going into the 'I told you so' file to be brought out in a year or two. Funny how greed and ignorance can blind people to the real story. Your point about people coming out of fixed rate mortgages is what Ive been saying ofr ages-no body listens. Thats o.k, the less they listen the more it will crash and the better value I will be able to buy:)

And that is the big question. So many of the equity investors locked in 2003 and 2004 when the market noticeably paused
and if they have not taken the time to fix up there personal balance sheets they will be facing very different lenders than the bend over backwards "lend money to a homeless drunk' bank of 2005. What they do will set the stage for the next tweak to the market.

Hands in pocket until then.

Scamp I am with you except for 1929, painful yes but think 91 will be worse ( I hope)

I have 2 loans fixed at 6.65% until 2009 when they will revert to the prevailing rate. In the last few years the rents have risen to a point where these properties will still be cash neutral. This is more a case of luck than astute financial planning.

If we do see a big drop in values (prices), it will be as many more houses are on the market due to investors having to get out as they over borrowed.  The ones who have access to funds will clean up as all the people who are not then homeowners will still need to rent.

Many are in your situation Attrill. Buyers know this, and are now waiting for people like you to tumble over, and foreclosures some on the market for 50% of today's price. It's what is happening in USA now, it will happen in Australia too. January 2009 will give more insight in the real trouble people are in. But if your bank devaluates your house by 20%, and you are negatively geared, then you will have to borrow at the variable interest rates of 10% to 11% ( if not higher by that time, there's already talks about raising interest again this month ).

Why don't you fix your interest now for 5 years ? At least you won't be one of the foreclosed ones.

Closing your eyes or putting your head in the sand won't let the problem go away : act now, fix your interest at 8.75% ( yes , you can still do this with your bank ) before you HAVE to do anything.

Interest at this moment will only go up , because Rudd wants to fight off inflation at all costs ( that's what he says anyway ) Just read the news, and make up your mind. I would not be surprised to see another 0.25 interest increase in June and one more in September.

Remember the 17% interest rates ?... they're coming back.

i have two property.... sounds like this is the best time to sell huh?

scamp with an attitude like that i feel you should be afraid
you obviously are weak minded and find pleasure installing fear in ppl

Kind Regards

Celebant Monk

he shall ask, he shall recieve

r u talking to me..... young gun86????

Before you give me a lippy u silly person.. this is a true fact that I have 2 property and I am in a process of getting appraisal and selling...cause I follow the market and i agree with the statement with the other guys... .. You mush have translated my writing in a different way..

hey ostrich i mean emu not for you was intended for SCAMP...if you feel negatively towards the market then maybe sell up good luck and all the best to ya.

He shall ask, He shall recieve

Scamp history repeats itself over and over again. Humans do not learn from history . I have studied the great Tulip crash 1634-1637 Holland and lived during the recession we had to have.
http://www.investopedia.com/features/crashes/crashes2.asp
http://www.holland.nl/uk/holland/sights/tulips-history.html

Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.