Dear Jim, I like to use of american stats , again in a totlaly raw form, to explain and justify austrlaian circumstances.
They have a much more volitile envrionment due to thier loan facilities - non-recourse and the gurantee system, ie Fanny Mae and Fredy Mac, which under a carter administration were given the 'orders' to gurantee loans to minorities and other low inocme earners who, and this is not meant to be racist, but shouldnt have got loans.
This combined with loan packaging etc and the credit debt swaps and associate dfinancial engineering and the associated income to be derived meant that all and sundry had the opportunity, and the final risk transferred to the american taxpayer.
In australia, mortgage insurance is the closet we get to the fanny mae and freddy mac situation and while defualts have increased they are miniscule when compared to the US problems.
And Jim, as I explained to A1, Slappi and others who like to quote statistics, my undertanding of stats 101 is that in their raw form they are not very useful and may not have reflected structural change that has occurred. in addition, australia does not have the over supply of housing nor a stable of decraseing population.
As I explained to A1 and others, I agree that there will be softening in the property market and for those poor souls who do to divorce, loss of job and other unfortunate circumstances may be required to sell at any price. however, there will not be the avalanche that you seem to be predicting.
the australian govt has taken the action to intorduce a monetary policy of ensuring that people can stay in their homes by making mortgage payments as affordable as possible. Again this does not mean that prices will go up. Rather for current investors who can get the right property, the rental income will be greater than the interest and other expenses, giving a positive cash flow.
these factors should give soft landing and cause a minimum ditress on the community as a hole, except for those renting.
