Check the article below out from 2010 on the Australian property bubble - it's remarkably similar to the bubble articles 5 years on. You can also check back on Hotcopper from the same time (Oct/Nov 2010) and the discussions are pretty much the same as today with "bubbles" and "time bomb" threads.
Fortunately, I ignored the doomsday preachers then and invested heavily in a property syndicate in 2010. It is just winding up after 5 years with a return of over 100% fully franked.
With the profits I paid off my home mortgage and the loan on my investment property and put the excess profits into another property syndicate.
If you believed the bubble hype in 2010 you missed some great profits.
I wonder when we look back in another 5 years whether we will be saying "Hey look the experts got it wrong again" or "Hey look the experts actually got it right for once"
You have to make your own call but many experts got it very wrong in 2010.
Source: The Australian
A SENIOR Treasury official has sounded the alarm over Australia's property market.
He has warned that the prospect of a sudden and dramatic drop in prices is "the elephant in the room" and should not be ignored by the federal government.
While the government and Reserve Bank insist Australia does not have a housing bubble - as some economists and the International Monetary Fund suggest - it remains such a worrying concept that Treasury has privately sought reassurance from its analysts that prices are not artificially high and that Australia does not face the kind of house price collapse that has hit Britain and the US.
Documents obtained by The Weekend Australian under Freedom of Information laws show the Treasury officials preparing the so-called Red Book of briefs for the incoming government were as divided as private sector economists about the strength of the property market.
Phil Garton, the manager of Treasury's Macro Financial Linkages Unit, sent colleagues a draft paper on the rise in household debt, prospects for further growth in the debt-to-income ratio and the potential implications of slower household debt growth.
His email prompted an exchange with Steve Morling, currently the general manager of the Domestic Economy Division, who argued the paper should "make a bit more about the risks".
"The elephant in the room is house prices or more specifically the risk of a precipitous drop in them, perhaps from an external shock or perhaps from their own internal dynamics when affordability constraints or capacity debt levels see prices and expectations of house prices start to move in the opposite direction," Mr Morling wrote on June 15.
"(I) know there are very supportive fundamentals, but prices rose by 50-60 per cent in three to four years in the early part of this decade, with largely unchanged fundamentals, so they can have a life of their own.
"And given what's happened elsewhere I'm far less sanguine about this - and the interplay with debt - than in the past."
Mr Garton agreed that there would be risks if the fundamentals of low interest rates, unemployment, and financial deregulation "reversed significantly". But he maintained the price growth in the early 2000s was based on a "lagged response" to improvements in the fundamentals, and questioned how Australia could have maintained a bubble for more than six years.
Mr Morling said other bubbles had lasted that long, and the fundamentals were often used to justify price rises - including in Britain where a debate over lack of supply drove property prices higher "before the British property bubble burst".
"(I) think price expectations can take over from the fundamental drivers that you have identified for extended periods, including generating house price falls," he wrote.
With house prices static at best - the market is particularly soft in the capital cities - there are renewed doubts over the boom of the past decade and whether prices are sustainable.
Average house prices doubled in the 2000s and, despite the global financial crisis, remain 20 per cent higher than levels three years ago. The latest figures from the Australian Bureau of Statistics showed prices rose just 0.1 per cent overall in the September quarter - and fell in all capital cities except Melbourne, Perth and Darwin - but were still 11.5 per cent higher over the past year. Treasury's Household Demand Unit is re-examining the fundamentals in the property market to determine factors that have driven, or sustained, prices.
A spokesman for Wayne Swan said yesterday the Treasurer retained the view that Australia did not have a property bubble, citing recent reports and statements by Westpac and the RBA. "Of course, we expect our officials to test and debate policy within the department - it is an important and normal process of government," the spokesman said. "However, it is the considered position of the Treasurer and the Treasury that our housing market reflects the fundamentals of supply and demand and not a bubble - specifically that Australia is simply not building enough new houses."
The RBA was concerned by double-digit price growth earlier this year, especially in Melbourne, but now expects interest rate rises to moderate demand and keep prices at a realistic level.
The RBA has gone to great lengths to pull apart claims of a housing bubble by the IMF, Morgan Stanley economist Gerard Minack, legendary US investor Jeremy Grantham and The Economist magazine, even comparing and contrasting their modelling.
On Thursday, RBA deputy governor Ric Battellino sought to reassure the market that the slowing in growth of household debt would lessen the risks to the economy.
"The current picture is one where borrowing for housing is broadly growing in line with income, house prices are stable and there is little appetite for other forms of debt," Mr Battellino said. "From the Reserve Bank's perspective, this seems to be a satisfactory state of affairs."
The RBA believes demand was responsible for the early rise in property prices, and government restraint on housing supply prevented a US-style slump.
The OECD report on the Australian economy released at the weekend did not identify a "bubble" but warned that house prices could not keep rising faster than household incomes.
"Caution is advisable, given the experience of other countries," the report said
