property bubble confirmed -finally, page-51

Let me ask a question - what happens when Sydney for example gets to the point where there is no more land and there becomes limited capacity to knockdown houses to build units - but the population is still growing strongly via internal and external influences?

I'd imagine the answer is prices will rise until only the very rich can own property. The other option is for people not to live in Sydney, but this is exactly why south-east Queensland is powering along the way it is currently. So this just has the effect of increasing prices somewhere else.

The bottom line is that there are certain types of property (particulary houses) in certain locations that just won't be subject to price falls unless Australia becomes economically strained. Sure if unemployment rose to 9% property would have no choice but to come under presure due to the reduced capacity to service loans. And if interest rates rise back up to 12% this will effectively double interest repayments from the current rate.

But for interest rates to rise to 12% inflation would have to be spiralling out of control, and anyway, because wages would be growing so rapidly, the 12% interest rates would be easier to cope with effectively balancing things out.

The Australian economy is in good shape and I can't see any reason why there will be a sudden mass reduction in employment. Australians are generally well off, well educated, love property and the renovation era is just beginning. When I was 23, although I already had my first investment property, I was definately not the norm. Most 23 year olds were to interested in getting a hot car then buying a property. Today they are more anxious about how they can get hold of their first property.

I must say I am surprised by some of the posts I have read in this thread. I read things like - the best thing you can do today is to sell all your property and rent for the next couple of years. Well what if you can't read a crystal ball - what if your wrong? What has happened to those who did this two years ago? What about those two or three years ago that decided to stay renting because property had already gone up in Sydney. They'd be prety annoyed by now.

Yes property has gone up a lot in recent years, and household debt is at all time highs, and yes some property in some locations will go down and maybe up to 20%, but how do you know it will be your property, your subburb, your city?

How do you know that units in the inner city will fall? If houses are so expensive, there is only one option for first home buyers and that is the unit. Either rent for ever or buy a unit and get some sort of start. That's what people with think. That's what I'd be thinking.

People have to live somewhere, if all property falls 20% then you can bet your bottom dollar that sometime in the years following it recovers moves above it's previous high. Property is not like shares. Nobody needs shares. People need a roof over their head, and they'd rather not pay someone elses property off for the rest of their lives. If shares go down, you can sell them in a second. But your not going to sell your house and start renting just because it's price is weekening. You sell your house and pay some agent an amount of commission equivalent to what it would cost you to rent for a year, then a couple of years down the track you pay another 30 grand to get back in. All this on top of your rent - that's how you lose money.

To answer the question, will property fall by up to 20%? The answer is how likely is it that the Australian economy will dive into recession, with unemployment at 9%, with interest rates of 12%, and Australians prefering to pay each others properties off rather then their own. If there is a real chance of this happening then sell now! Otherwise just except that you may have a few years of flat growth in your house (heavens forebit) until the laws of scarecity through supply and demand work to push property up again all over again.

I'll leave you with a thought...the year is 2040, Sydney's population is 10 million...protected forests to the north and south, the last block of land went 20 years ago...