"...So a x% drop across the while market is shear fallacy..."
I never said that. I am talking about a median drop (not disimilar to a median Melb/Syd price rise quoted by the RE industry). I don't care whether your property has diamond studded downpipes or gold plated electrical fuse box cover and a potential gold mine beneath your swimming pool.
"..Most of the speculators that were in the market would have probably left by now..."
If this were the case, the median house price in melbourne woukd be $200K and the banks would be on life-support. Also how do you define what constitute a speculator vs a long term investor ? So, anyone who flips units are out of the market ? while the mum-and-pop investors (among them are teachers and nurses) ar all staying out and not having a single speculative bone in their bodies ? How long do you have to hold on to a property not to be classified a speculator (12 months or 12 months and 2 weeks) ?? Does someone who negative gears and hope for capital gains deemed speculative ??
You really have me confused.
"...Time will allow rational thoughts to fully think through all options. .."
What if the rational thought is to dump and exit ASAP because you are trapped. Also when the crunch comes, time will be the last thing on one's side. I am sure if someone who has a few million spares can calmy assess the storm vs someone buried head deep in debt serving mulitple loans.
"...And the vast majority won't need to liquidate their properties either..."
The initial process of downward housing correction was already in train until cash rates was in utter panic slashed from 7.5% to 3% in a flash. Then came Mega FHOG giveaway. This only bought time but made the matter much much worse (as we now have to confront).
"..No they won't ask owners to top up as it is not in their interest to do so as they would make any down turn so much worse..."
I have answered this many time before. In rosy, plain-sailing blue-sky period, the (BIG4 - not your 2nd/3rd tier) banks will do their civic duty to provide breathing space. It's good PR. There is nothing worse than TT & CA airing folks getting kicked out in tears. When a pervasive house price correction occurs, the banks must protect their balance sheet. Bad debts in this scenario can quickly turn profitability to losses. Otherwise, their SP (and worse still their Credit Ratings) will tank. It's not in the interest or mission for the banks to be good samaritans.
"...Then due to the way their loans are in the US many just handed their keys back because they didn't want to wear the negative equity..."
Only if we had jingle mail here, our housing crash here wouldn't he as horrific. In Australia, you end up losing everything.
"...Actually whether you, I or anyone else likes it one thing that will be assured is that the government will do ALMOST ANYTHING to cushion the effects of any large scale property down turn as if they don't then it will be political suicide for them..."
Perhaps I didn't clarified my point sufficiently well by political suicide. With a massive deficit, if the government continues to fuel the bubble (with money it doesn't have) simply to delay the inevitable, can you imagine what that would do to the $AUD. What would be the interest rate risk premium overseas banks (providing the bulk of the funding needs) would charge the Big4. The bubble is bigger than anything ever seen in an OECD economy.
There is nothing the government can sensibly do (hence I maintain the CORNERED predicament of the housing market). The RBA also has it's hands tied. It may jaw-bone and talk down the propsect of rate hikes to soothe some nerves (while hiking regardless).
