Thank you for taking that time. I was responding to blueballs whilst you were typing that so I was unaware your post was coming otherwise I would have waited.
I am intrigued by some of the things you have said.
The differentiation between wages and disposable income was something I had not picked up on and now that you have pointed it out I am ashamed it did not occur to me.
With rising food prices and fuel prices some of the tax cut advantage will be eroded but I don't know how much. I don't even know if it will be significant.
The first home owners grant is pointless as most people will have come to accept but I agree with you that it is politically difficult to remove. Still I would like to see the Rudd government bite that bullet. On balance, it didn't help and won't in the future.
A potential credit crunch is something that others have suggested will crash property but we have already had one of those back in the early 70's. I was a little tacker at the time but I have read my history and I know what happened.
The lack of easy credit restricted beginners from achieving bank-backing to buy a house but banks being banks need to loan money to grow as a business and they focussed on asset rich individuals and loaned to them. The people who were refused credit rented and fortunes grew for people who could borrow to buy investment properties.
These were the days before capital gains tax so I assume (I don't know for sure) that investors would have been more prone to sell after a few years of growth and enjoy their profits. That's not really relevant to what I was saying but it occurred to me as something I should investigate.
You have examined many "shock" events but the fundamental change they would cause would be lowering population growth.
Believe it or not I would welcome government moves to decentralise and take pressure off existing urban centres. I am a softy at heart and would like to see an Australia that is egalitarian without the wealth polarisation we are tending towards. Having said that, I am not a person who can make these changes so I take advantage of the situation that exists at any one time.
Here in Melbourne they have a plan called "Melbourne 2030" and it aims to do many things but one that is relevant to this discussion is the "Transit Cities" initiative.
The Vic govt has nominated outer suburban areas and has funnelled state funds into the infrastructure in those areas in the hope of promoting business to establish there.
It seems to be working albeit at the usual snail's pace at which major changes move. The suburbs of Dandenong, Frankston, Altona and some others I don't remember have all become Transit cities and given time we may see pressure removed from the centre and distributed more equitably.
Having said all that, property investment will still work well if Melbourne 2030 works, it's just that investors will move their attention to these other areas.
Your point about the self-fulfilling nature of price expectation was intriguing and rang true. If enough people believe an outcome is likely then that sentiment could be reflected in asking prices and price offers.
I'm not sure how long it would last if it occurred. The demand/supply ratio is still very powerful and if property was a discretionary commodity then it could be hurt worse but the fact remains that people need a roof over their heads. They need it and if supply is restricted whilst demand rises I think sentiment would affect things only so much.
As far as prices flattening, that is all part of the cycle. Generally speaking, property moves in 10 year cycles (give or take a couple of years). The majority of that cycle is "flat". In 10 years 7 or 8 years will have flat growth which is then compensated for by 2 or 3 years of exceptional growth.
Rarely does it not match inflation but it has happened for a couple of years here or there. If you take very long term average in Australia you will find that city-wide medians in the big cities tend to average growth at about 3% above inflation year in year out.
Having said that, we can't buy city medians, we can only buy a property here or there so we can be selective and buy in areas with greater underlying demand with restricted supply. That way we can continually have growth well above the average I stated.
You pointed out that pockets of value will exist and my own experience has been that is not difficult at all to see where that value will be found.
Thanks once again for your thoughts, it was a refreshing change from the usual we get from the doomsayers in this forum.
