Another factor to consider is that despite all the predictions real estate has dropped a nominal amount relative to other asset classes.
What will happen now - to avert an all out drop in the economy - rates have to drop and the favoured asset class is going to be property. Not the desired result of the RBA but can not afford to go down the path of the USA. If property values plunged here like they did in US and UK there would have to be some huge rescue packages ready to roll - we will not have that happen.
Property will stabilise in some states and rise in others particularly where the credit crisis aborted property value rises as in Melb, Adel and Brisb.
As for the drop of 30% - 50% tauted on this site - I hope those people see how foolish they have been and how little they understand our market in that unlike the global asset classes property here has a mind of its own. It is treasured above all else by we Aussies and you will not remove that from our psyche.
Needless to say lets hope our lending practices remain controlled and that some form of insulation is offered to firsthomeowners from the changes in rates in the future.
Affordability - what an overrated expression that has come to bite the political propagandists in the butt and nearly derailed the economy as with the inflationary doublespeak!
