"When one discusses property as an investment instrument or vehicle with respect to the asset price cycle (in the case of Australia we have had a prolonged nation-wide price inflation engineered by deliberate policy and recently policy mistakes), it is meaningless to dwell on a particular suburb, street, precinct, region or whether your property is near fantastic amenities or the individual property."
Actually it is much more meaningless to look at the the overall market. We don't invest in the market we invest in a particular suburb/property all of which can behave very differently to the overall market median that is portrayed. In a down market higher priced properties will likely fall large amounts percentage wise, while cheaper properties will either maintain their prices or drop significantly less in price percentage wise. So a x% drop across the while market is shear fallacy.
"When I refer to a 40% or 50% fall in median price, it's no different to the REI quoting a rise in median price for a particular city for particular duration."
Both are just as irrelevant particular property and area characteristics are all that matter and that will drive the growth of your investment more than anything.
"The more properties one has (especially highly geared), the more the panic that sets in. Zen meditation won't help." Time will allow rational thoughts to fully think through all options. Sure it still may result in a sell but it will be a more considered sale. Whereas when panic sets in in the share market many just panic about the on the spot price and dump causing a fast cascading reaction.
Many people held onto their stocks throughout the GFC (caused they didn't need to liquidate)." And the vast majority won't need to liquidate their properties either.
"The other problem with property speculation is you typically deal with from hundreds of thousands dollars to millions in borrowed funds." The VAST majority of holders of property are NOT speculators they are every day homeowners and long term investors which will do everything within their power to keep their properties. Most of the speculators that were in the market would have probably left by now.
"So far banks here haven't asked to top up because the crash has yet to happended. In a wholesale collapse in house prices, the banks may ask mortgagees to top-up to ensure acceptable asset/loan ratio. It's part of the banking regulation." 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. As long as owners are maintaining their required payments then they will be fine. If the bank needs to improve it's capital position in the short term it will raise funds. Those that were foreclosed in the US were because of non-payment of loans on a large scale due to a large change in interest rates resulting in a large price drop. 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 (which we can't do here) - they were not asked to top up their loans.
"The government can't do anymore short of handing out money to investors to buy properties (another fix to keep the junkie alive for another 30 minutes). Even if the government had a $100 billion surplus (it is in debt to the eyeballs), it would be medium term political suicide."
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, and if anything can be assured is that politicians will look out for their own interests first!
