The latest from AMP on house prices and affordability, I expect goventment intervention to release a flood of land, tax changes eg negative gearing legislation / depreciation or other measures to solve this problem if they have the guts. The current policies are doing nothing to releive the rental shortages by promoting building of new properties. What I see happening is the baby boomers selling their property to the younger generation at these inflated prices and a downturn happening all hell breaking loose, even though we dont have the subprime market the US has we have a large amount of low / no documentation loans and growing fast....expect default levels which have risen 300% this year to increase at a high rate It would be a brave punter to be buying property in this market imo...upside is limited and downside is around 30% according to this article and 50% according to the lates OECD report
Conclusion An ongoing undersupply of housing is clearly supportive of house prices. However, ongoing strong gains or another housing boom are most unlikely as Australian housing remains very overvalued, housing affordability is very poor, housing rental yields remain low and the risk for interest rates is still on the upside. The recent weakness in share markets – at least so far - is not enough to drive an investor rotation back into housing as occurred after the 1987 stock market crash and earlier this decade. Furthermore, conditions in the housing market are far less favourable today than prior to the last two housing booms. The most likely outlook for house prices is for modest gains on average, with this masking a very mixed picture depending on the area. To borrow from the lexicon of share investors, this is likely to remain a house pickers' market. Dr Shane Oliver Head of Investment Strategy and Chief Economist
