A lot has been said on many sites on HC that we will follow the US housing market but little attention has been paid to their supply and demand situation.
Australia suffers an acute shortage of homes. There is also no sign that we will be able to supply the shortfall in the near future. We all know that there is a rocketting of rental prices taking place.As rents continue to climb in most centres - property becomes more attractive to investors.
In the US officially 1,100,000 homes stand empty, its possible they could have up to 8,000,000 empty homes. Their loans have no right of recourse, plus their interest rates are at least 300% higher than ours.Their mortgage market has withstood fraud on a scale we can't really imagine.
This then tells us unequivocally that if we were going to folow their pattern it would have happened by now. It has not and now that we have rates coming down we can rest assured that the floor on our 5-10% loss on prices is being cemented. Every drop in rates will strengthen that floor and the inverse will happen sooner than later.
Coupled with that the sharemarket has lost its gloss and the traditional Aussie homeownership values will reassert itself and buying will pick up.
Real estate in Australia is the real survivor and thank goodness that my investing bias was in that basket despite the protestations of my investment advisor. Had I listened to him I would be down well on value. Was I nervous at any stage - of course - and like many very thankful the contagion only went to the readily marketted asset classes that can sell at the click of a button. Value in property exceeds the value of PE ratios, ebit... it is a home first and foremost and will be held on to by all who live under a roof. It can even provide a shelter for increasingly valueless speccies statements - which appears the favourite domain of the young HC players!
