I see 'rising household debt' is now being mentioned in our media streams along with a bubbled property market. Check out the stories and have a read.
In opinion:
As i said many times, our housing market is due to cyclic fall and I'm talking about a real bad one. Rates have nowhere to go but rise. Investors have been greedy expecting their pyramid property empire will grow continuously.
I expect the entire Australian housing market to fall more than 30% in value over the next few years:
Houses costing 5 million will be worth 3 million.
Houses costing 1 million will be worth 600-700 thousand.
Houses costing 500-600 will be worth 400 thousand.
Units costing 300-400 thousand will be worth 250-300.
Living in Australia over decades with experience in the industry I've witnessed property cyclic markets and right now we have a cocktail for disaster in Australia when debt levels are reaching high levels combined with the realisation that wages in some industries will fall due the open gates policy our government provides to foreign workers who generally will work for less. As salaries plateau and debt increases stressing households trying to pay off a dream they cannot afford, there is nowhere to go but to consolidate property, downsize and cash up for a long winter.
This is a reality which many will reluctantly accept but will have no choice and governments need to suck in the lip and get on with it. I have personally spoken to Chinese investors and they are showing signs of understanding that value in our market is quickly diminishing and there're better opportunities in their local property market in China now as it's recovering.
Last time i can remember was late 80s early 90s when the Australian property tanked as Japanese investors walked away with our market being overpriced as rates began to rise significantly. Property values plummeted. People were reluctant to buy, people were reluctant to sell and real estate agents struggled as commission only high life sales became retainers to ensure bills could be paid.
Our government has an obligation to ensure our property markets are cyclic and not propped up protecting something which has to run its course to the downside. I feel this fall will be as severe as the 90s because in reality, our market has not dived (properly) since the 90s. In my eyes we literally skipped a much needed downside cycle when our government 'stimulated' the economy during the 2008 financial crisis but what it may have done was not only save the day short term, but provide an artificial confidence that property markets go up forever when we flick on the televisions glamouring Reno profiting etc. Try and Reno and flick off in a falling market. Boy oh boy will that hurt.
I think Australia has lost the plot.
Property is due to dive.
Mining is now gearing up into a profit boom when people are only waking up to that fact which has existed for over a year as commodity markets are recovering in a bull market cycle.
Yet we still have a bubble property market ready to pop and mining stock SPs are still at lows when many miners are nearly debt free.
To me there is a massive disturbance in the market force and this needs to be rebalanced. Where it is pain for some will be gain or opportunity for others. The longer Aussies and foreigners hold onto protecting the soon to be Australian nightmare, the harder it will fall taking investors down with it.
This will be Australia's mortgage crisis on a smaller level compared to US but will no doubt still be damaging.
