I will look more carefully at your post, and come back to you later on some of the points you have made. As for "living", I tend to rest late, and rise early (it also helps being on Leave, being largely left alone by the family, and by the office. As for the post, it was largely penned last week, but not blended until last night).
My inner CBD point is largely driven by the following: 1) Ready access to, or availability of, support facilities will generally broaden the demographics of those interested in moving to the CBD. Otherwise, the addressable market is narrower than what is currently being envisioned, or marketed to (ie: older Australians, family groupings, etc excluded, whilst singles, childless couples, and urban professionals are favoured). 2) Young professionals may have higher disposable incomes, but in order to support their choice of location, and choice of lifestyle, they are dipping heavily into their discretionary income. A CBD lifestyle, supported by surburban facilities, generally translates to a more expensive, active lifestyle (ie: eating out, not in, high level consumption, etc). The risk here is that the twin pillars of location and lifestyle may well peeter out once interest rates, or the economy (as Copydog has suggested) takes a spin. 3) Many CBD properties are coming with limited car access, secured garaging, or availability of 2 spaces, and public transport is neither continuous (ie: 24/7), or convenient (in most circumstances). This potentially restricts freedom of movement. 4) The lifestyle choice is better in the CBD than in the suburbs, but again, the suburbs are sufficiently proximate to these choices without the need for them to become necessities of life (ie: always eating out, not in). 5) The CBD risk is, therefore, one of income exhaustion as urbane professionals either face rentals >$350pw in 1+ residences (ie: bedroom, plus study), monthly loan repayments of between $1500 -2,000 (ie: in Q4, 2002, the average loan actuals were $2427 in Sydney (vs $1245 in the rest of NSW, $1660 in Melbourne, $1319 in Brisbane, $1136 in Adelaide, $1070 in Perth, and $1500 in Canberra).
Despite this, I do not see property falling by the 40% rate suggested by CopyDog, although I do see property taking a breather.
The 40% rate, however, is quite interesting as the correlation of this to the public sentiment is quite high.
In September last year, UBS Warburg said that property prices could fall by 40% (in order to return to historical trend values). In early April, however, they changed their argument to reflect that a 2% drop would return prices to fair value (whatever that means).
2 weeks ago, the IMF said that there was a 40% chance of property prices falling by 20 -40%.
Similarly, Fitch argued on 14th April that a significant fall in property prices was likely (subsequently insterpreted in the media as re-inforcement of UBS Warburg's original 40% scenario).
However, as a closer examination of the Fitch report bars out, property prices have increased by a factor of 1.5x to 2.5x (dependent upon location) since 1989, and by the following, since 1997: 1) House Price Changes Melbourne 24% (in 2y to 12/00), and 74% (in 5y to 12/02) Sydney 48% (2y, 12/00), and 84% (5 y, 12/02) Brisbane 54% (2y) and 80% (5y) Perth 28% (2y) and 42% (5y) Adelaide 39% (2y) and 64% (5y)
2) Unit Price Changes Melbourne 31% (2y) and 96% (5y) Sydney 35% and 71% Brisbane 3% and 48% Perth 30% and 59% Adelaide 43% and 55%.
It was not so long ago that home lending was regulated by the Government (ceiling rate of 12.5%), and funding was rationed out by the Banks (hence the mid-70s emergence of Building Societies, Co-ops, and Credit Unions, as well as Bank controlled NBFIs, such as Cutom Credit, Esanda, etc).
Regulated lending, rationed out, and fixed in terms of interest rates meant the following: 1) restrictions on growth opportunities; 2) limitations on loan portability; 3) ceilings on property prices (ie: artifically constrained - this is one reason why Australian housing prices lagged global housing prices throughout much of the last 100 years, and were largely sub-optimal as an asset class - ie: in real terms); 4) real housing interest rates that were very high during the 60s, dipped negative in the rampant inflationary years of the mid-70s, were real during the early to mid 80s, and are now mildly real @350bp prime (even with today's CPI results).
In other words, whilst housing affordability is currently falling (due to higher prices), it still remains broadly comparable to that of the post-war years (and particularly, since the mid-60s).
Housing prices will ebb and flow for all manner of reasons. But sans a global catastrophe, they will not collapse by 40%. An abatement, yes. But a collapse, I don't believe so. But even if this does occur, I will be out there buying. In 10 years, I have not sold any of my properties, despite buying in the dips of 1994, and 1996 (and the abatement of early 2001).
Conversely, the rental market will return to its long term trend lines before 2005 (which means, at best 18 -24m of "buyers" rents). But, as to whether this will support the 2B+ units, or the 1B units, I do not yet know. My current line of reasoning is that 1B units will simply become too small, too expensive, and too uneconomic as a proposition, and this will lead to an abatement in these types of units being built over the next 5 -7 years.
