Property Prices Treble

Originally posted by MasseyFerguson ↑

I think there is some confusion going on in the forum this evening wrt property prices.

People seem to be confusing property price growth with timing or hard work.

I think what you will find is that the growth that you are seeing (seen in the past - it wont happen for a while) has been courtesy of a debt fuelled banking ponzi assisted by central bank's reduction of the cash rate. Lets be real central banks and the government are bending over backwards to keep this bubble up.

This has led to the illusion of wealth. In Australia we have this situation where people want higher house prices.. but then what?

How do you buy your next rental?
If you sell you only have to buy higher?
How many people can pay more than the person b4, can this occur indefinately?

With this we realise how damaging our obsession, and thats what it is, has become.

The damage to the economy is massive, its not spoken about and is in fact covered by the media government and the money movers of the world. The marketers. Banks are payed or make money from selling dreams - "The great australian housing dream" - the people buy the dream - for a figure - 10/20/30 years?

The cog in the link is the banks loaning more and more money so more and more debt and so it rinse and repeat. Only catch now is that interest rates cant drop much more. Case in point Perth was 500k in 2007 IR was 7.25% its now 500k at a 1.75% cash rate. What does this tell you? Sydney over this period made money for balance.

What does this mean?

Well for a well groomed property bear it means that we are on the cusp of 30/50% falls over the short term say 5 years. The insanity cannot prevail. Debt is at record levels (public and private), unemployment situation is getting worse, Property historically above trend line, gdp per capita is falling.

I have been a renter for well over a decade. This has not stopped me from investing, merely it has allowed me to view property in the same manner as any other asset class. I am unwavering in my view- despite the time taken- of a property calamity for Australia.

With this I am very comfortable waiting for nature to take its toll. In fact I regard it as essential capital management.

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Interesting points Massey. I was pondering the state of affairs last night and where to from here.

With the increase of globalisation prices for many items will continue to fall creating deflationary pressures in consumer goods, whilst freeing up cash to be diverted to hard assets such as property as we have seen. This is why the way the CPI is calculated is now useless. Council rates, taxes, health care and property etc all have increased significantly.

So where am I going with this. Well I really don't think we will see interest rates increase to past 'norms', unless the way the typical 'basket of goods' is calculated is changed.