This is the view I used to hold, however clearly its not...

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StockSoldier

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16/04/21

10:17

Post #: 52511482
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Originally posted by Menta: ↑

When property changed from being simply a place to call home to being an investment asset the game completely changed. It was then no longer about supply & demand, which determines the price of goods & services, it became all about the supply & demand for credit.

Australia's housing bubble, like all assets bubbles, was fuelled by credit growth and the current historic level of household debt, now some $3 trillion, is already unsustainable even with record low interest rates. As interest rates rise, bond yields have been rising globally for many months which is already placing upward pressure on the cost of international bank funding, unfortunately the debt burden with become just too much for too many Australian families to maintain. The resultant forced sales will quickly turn into a flood and lead to a house price crash. In such a rare deflationary spiral we can quickly transition from perceived under supply to actual over supply of housing, especially as people become less and less willing or able to borrow and banks become more and more reluctant to lend. We are about to enter tragic yet inevitably unprecedented times.

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This is the view I used to hold, however clearly its not unsustainable right now if interest rates remain low / go negative if prices are continuing to rise? The cost to service a mortgage is at an all time low - a $500k loan only costs $10-15k interest per annum. What chance is there that interest rates will actually rise in the near future? From all the RBA have been saying its clear they want to keep them on hold for 3-4 years at least. Wont the govt do everything in its power to keep the train going???
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