trade4profit, I appreciate and respect your point of view and they have been expressed before by yourself and other. Ironically, IMO it will be global inflation that will (even exacerbate the magnitude of the Oz housing crash).
With household debt higher than GDP, I am sure Glenn has already had Ricky by the ear and said, you pull that stunt again Sunshine and I'll......
The housing crash will "alone" IMO be caused simply by the RBA reversing back to neutral (cash rate 5.5% - many banks have pencilled this in) and many highly geared FHB and investors will be 10 feet under. Coupled with the demand-supply equation swinging the other way around and the effect is vicious to say the least. At 5.5%, it's 83% increase since last October. Of course Graig/Shane/Rory will reassure you all the FHB and amateur property investors have already factored that in.
Lets try to understand the psychology here. I believe this to be the near term predicament of my own friends and relatives.
I was and will continue to be a property investor (when wise to do so). I understand the tribulations and fears as well as all the dirty tricks in the RE trade. I won't elaborate too much other than take the weekly auction clearance results (with a boulder of salt). You can DYOR on how it is selectively compiled and ommitted. They will be interesting and I suspect they will be seriously challenged and exposed this time around.
For example, as an investor with 3 properties and debt up to your eyes, suddenly the evening news talks about "unexpected" housing start and loan approval plunge, then anecdotal price falls and higher pass-in results, then Stevie the academic and bearish Gerard with enormous credibility rubs it in with "I Told You So" (all the while the REI and BIS weasle talk folks into calm with the usual "plateauing" and "more sustainable" level), you may just for a momenent ponder......What were those 5 phases again ?
As this becomes a topic of preoccupation and water fountain talk in the office, you go home and punch the caculator on the kitchen bench and wonder if you should get out before it's too late or stay put. You refer to the upbeat and positive postings on Hotcopper over the years with a deep breathe "no way".
Suddenly, CNBC carries the headlines about Oz housing wobbles reminiscent of late 2008 US subprime meltdown. By then, sales sign pop up everwhere and price will have dropped 20%.
...Anyhow back to inflation.
Commodity price rise is fantastic for Australia (it needs every cents in royalties and duties to pay off the mega-deficit). Bad news, the mining sector employs only 1% to 1.5% of all Australians.
But if inflation takes off (the RBA rate settings will go into tightening). A mildly tight monetary policy in RBA cash rates is about 7% based on historic patterns in recent times.
