I'd be very watchful and cautious about investing in the housing market right now - I believe TIMING is everything....and the expectation that housing prices will always increase is fallacious and extremely dangerous.
My research indicates that the housing market in Australia tends to follow about a ten year cycle. The last low being 1989/90.
For those of you who don't remember - interest rates were very high and there were quite a few mortgagee in possession sales. I think from memory we were paying up to 17.5% for a housing loan - I unfortunately have destroyed those records. However what I have got is a partial record of business loan interest rates which may shock some people.
In March 1989 18.00%
In April 1989 18.75%
In June 1989 19.75%
In July 1989 20.25%
and that wasn't the end of it - I think we were paying 22% at some stage. For about 6 months our family (2 adults and 2 teenagers) spent every spare $ servicing our housing and business loans before we sold one of our business assets to lighten the load. A lot of people didn't have a choice - they had to do it really tough or go under - record rates of bankrupcy and suicide.
If you're in housing and negatively geared or have raised equity in 1 property to buy/service another property I wouldn't be panicing but I'd be doing some scenario planning, including worst case ....
cheers
Lekki
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