The average annual wage is now around $69k accoring to latest statistics. Property is overpriced in some cases here no doubt. In the USA a nice 4 bed 2 bath home could be bought from the bank in a foreclosure sale for under 300k recently, that probably cost that plus half to build with land costs.
I don't know, I remain unconvinced that house prices here could fall to that level given the head costs alone to council here before a block of land is even put on the market is around $70k for the developer. The old a third, a third, a third equation gives us a selling price of $210k for the land to allow development and some profits to the developer. A simple 4 x 2 house can be built for around $180k on that land giving a costing of $390k just to put it there.
Thats around 5.5 times average annual wages, where aconomists have said it should be maybe 3 times annual wages. Most inner city homes in Australia are 10 times plus average annual wages. The only way I see a reduction in prices taking place is for the Government to develop and 'give' land to new home buyers. Wouldn't that cause a stink for the rest of us who have paid what it cost live where we do!
The fact we don't have 'jingle' loans here I believe will insulated us from the massive dive in property values experienced in the US. The UK property market did dive but no where near the extent the US did in some cities.
Overpriced property in our cities will fall as the demand for multi million dollar properties has diminished somewhat. Suburbia will continue with some correction, maybe 5% - 10% depending on location and the motivation of the seller. The banks in this country are severely over exposed to home mortgages and cannot allow prices to fall or they would face a huge liquidity problem as they did in the US, therefore property prices will be artificially held up by Government and the banking sector through holding up supply of land releases and the continuance of high valuations.
I believe the price of a well situated and maintained home will still hold up price wise, though not increasing as in past years, as will land values.
