A correction in house prices is barely that (in aggregate) & already a few hear think its the beginning of something great.
Maybe it is, but I want highlight a few points: 1) Councils, state govt's & the Feds earn substantial revenue from property sales taxes. 2) Banks loan books are heavily biased to residential mortgages. 3) The voting public is practically all-in on property speculation.
These three factors will weigh heavily on policy making. You can be sure all levels of government - ALL - will attempt to keep the party going. There is way too much at stake to let it go down the gurgler without a fight.
So, expect to see stimulus in the near future. We've had some already in Victoria - a halving of stamp duty for FHB'ers only (phasing in at 20% from July) & extension of First Home Owners Boost (up to 26k) to July 2012. This move sounds counter-intuitive to my argument above, but consider the flow-on effects if the FHB'ers get back in - a small price to pay up-front for the Vic Govt. in return for increasing sales volumes across the spectrum.
To me, the real question is - how will the general public react to the introduction of more stimulus? This is key. Personally, I think the gig is up. We're tapped out, and see the horrific results of the last FHB grant appearing now. Have we run out of idiots? You never know in advance.
Disclosure. Previous views held by me:
1) The Berlin Wall would never fall in my lifetime. 2) Mutually Assured Destruction is a permanent geopolitical reality. 3) Ian Paisley & Gerry Adams will never shake hands, let alone form gov't.
