What you post bears no resemblance to the realities of market forces in Australia...or the building/construction market in general in this country.
And whoever it was that posted about "cheap imports from China"...they are only a minor cost component when it comes to the key costs of construction in this country such as, timber, steel, concrete, bricks, etc...which are mostly sourced from local origin and continue to increase in price.
Same with the labour costs...I refute the notion they have collectively dropped, other than for a short period immediately following the darkest lows of the GFC. Anyone involved in building, contracting or developing in any way over the last 18 months will attest to the fact costs at every level are well and truly on their way up.
Finally, as for inflation causing house prices to "collapse beyond your worst fears"...lol...this defies basic economics 101. Hyperinflation, allowed to surge unchecked for many years, after initially pushing house prices higher, would eventually lead to economic collapse and eventually see property prices fall...grantedhowever I don't think anyone is silly enough to think hyperinflation will be tolerated on a global scale.
What I am talking about is higher than normal, yet a controlled increase of inflation with tight reigns applied, as a way for the global economy to break free of debt...to retire the relative scale of a large proportion of its incurred debts.
Borrow $300,000 as an interest only loan to buy a house worth the same amount, when your wages are $70,000 per yearand you are forced to service an amount which impacts your living standards and capacity to grow for some 20 or so years. Importantly, servicing such an amount will remain consistently difficult in a low-inflationary regime, which dictates only modest wage rises, further impacting your capacity to improve your situation.
Introduce a higher inflationary environment however, then some 5 years later your income has increased to say $140,000...and suddenly the original loan does not have such a detrimental impact on your lifestyle, now representing a much smaller portion of your total wealth. Even though, along with your wage rise, inflation has increased the cost of everything...the loan remains at the same amount.
Fast forward another 5 years...and higher inflation sees you earning $240,000 and the impact of the loan taken out some 10 years earlier is almost non-existent, especially when the asset covering the loan is now worth something like $1.2 million.
The above is simply a fast-forward version of what transpires in every property market...and what we have seen in our market over the last 30 or so years.
By example, a house bought 30 years ago in Melbourne for say $70,000, when wages averaged something like $20,000 per annum, is now worth well over $700,000...further, your capacity to service said loan today is significantly improved given your income is now closer to $100,000importantly, the loan you took out all those years ago, which seemed so large then, only represents 10% of your asset value...and this managed to happen during a relatively modest inflationary period.
Double the rate of inflation over this period, which would likely still see a number under double figures...and the above scenario speeds up considerably, looking not unlike my higher inflation scenario above...what might have played out over 30 years now only takes 10!
The world economic circumstance is no different...collectively it has taken out a massive loan to fund the numerous stimulus packages...and now must rely on inflation to help reduce its impactunlike us of course, these global economies can dictate what level of inflation they want. So, if it is advantageous to do so, they can turn it up to what ever level they want, even if only until the massive levels of debt return to a more serviceable amount.
In this regard, Australia finds itself among the healthiest economies in the world...both before, during and likely after the GFC...this in no small measure directly relates to our cultural need for home ownership and the financial systems support thereof, but also due to the shape of our economy, its focus on raw materials and proximity to a major global wealth shift in the form of the China/India/wider Asia growth regime.
Locally, whilst many clearly over-extended in the lead-up to the GFC, I think it is fair to say very few Australians who went belly-up, did so on the back of property exposure...more than likely, losses elsewhere such as in the share market, or via over extended borrowings they could not service, resulted in forced property sales rather than the other way around.
Collectively, and relative to world markets, property prices in Australia hardly moved due to the GFC, other than a short period of "adjustment" on the back of numerous liquidations which created a temporary oversupply scenario and corresponding drop...it was not however due to macro shifts in supply/demand ratios and as such, was very short-lived.
Within reason, land is finite, so too are most suburbs, which reach their optimum populations pretty quickly, struggling to accommodate expansion beyond original planning parameters...so...when each is "full", along comes the next suburb, further and further away...and with it more roads, more infrastructure, etc, etc...
The common denominator here is growth...endless growth...which in turn creates more jobs which leads to higher home ownership and the cycle repeats. On top of this, we have significant growth fuelled by immigration. Lets not forget, for every refugee or humanitarian entry, there are many many more via official application, the prerequisites for which are tough and typically dictate the need for significant asset backing, relative wealth and/or career capacities. This sort of immigration leads directly to growth.
By contrast, the biggest killer for growth in the property occurs when governments allow higher density living, which increases values of some areas of the market, but collectively stagnates the wider economy due to the fact "densifying" an area does NOT result in new infrastructure, new roads, etc...it does not create new jobs but simply shifts existing jobsand all it really does is lower the living standards for the area concerned.
Seriously...the concept housing will, in any way shape or form collapse in value in this country is just plain juvenile scare-mongering based on nothing of measureI see absolutely no evidence of this scenario, either current, historically or from any realistic forward projection.
You cannot increase a countries collective wealth AND reduce the cost of housing at the same timeit is simply impossibleand in this regard ask if anyone can show any world-wide model that historically has followed such a path?
Andthe argument that economies cannot support rises in property values simply does not stack up either...compare Hobart to Adelaide, to Melbourne, to Sydney, to London, to New York, etchouse prices follow wages growthwages growth follows GDP growthetcall of which is switched to overdrive on the back of higher inflation!
As prices rise, and various groups are priced out of an area, we simply see a financial filter applied to who can and who cannot afford to live in an area...which in turn drives prices even further. However, if there is not enough money within a certain group to fill the given space (ie, buying everything available at a certain price in an area), then prices will simply fall back to a group that can...it is a pretty simple equation actually.
Growth however will ensure plenty are coming through to pick up any buying slackand whilst some are waiting for the horse to bolt before calling a higher inflationary environment, others see the gate open NOW and know what is about to happenthey are buying in preparation.
In relation to the above, I really must say, I do not see any evidence of a collective drop in Australia's wealth as some are suggesting...on the contrary I see it increasing...especially on a world stage, where our collective "wealth" as a nation has risen significantly relative to others, even if only as a result of so many doing so poorly.
Holding steady, even rising slightly when all others are going backwards, is as good as growing at 10% when others are only achieving 3%.
The latter in my view is a significant driver for our economy...and property market...not so much driven locally but at an international level;
Australia is looking pretty attractive right now.
Commodities are on the verge of a major run, the type of run that may never repeat in our lifetimes in its magnitude, partly driven by stimulus induced inflation it will none the less mostly occur on the back of the equivalent of "peak oil" for many commodities, where an important cost versus recovery ratio, relative to the styles of deposits remaining in the world, dictate significantly higher prices are needed.
In short, the cheap, easy to get to minerals have already been mined long ago.
The world is about to see a one-off period of inflation, Australia is likely to be the beneficiarythis will clearly reflect in property prices.
