Hi nttg, you said: "The other effect is that FHB and other property buyers seeing inflation go up will want to get in before prices go up."
Ive got an issue with that scenario. FHB's really, really are tapped out. They cant afford houses - period. Ive done the numbers. The current rush on by FHB's is a case of blood-rushing-to head & is going to be their undoing because of deteriorating economic conditions. Variable interest rates might go up but I doubt it. The RBA knows the economy is on a knife-edge & if they raise rates they will crater the economy. Any interest rate rises now will be at the long term end (international money-market driven, not RBA driven) Either way, FHB's and prospective FHB's are screwed in the medium term.
As for the inflationary environment you're predicting, there is going to be inflation all right, but not as we know it. Inflation is going to rage unchecked because central bankers know if they raise interest rates they will impair the ability of individuals to pay down their high debt load. There is way too much debt. Investment instruments such as houses will suffer for a while because of the financial crisis. Debt needs to come down to saner levels before housing can resume its upward march.
The big win for housing investors is going to be yields, imo. They're going to absolutely rocket because to rents will be the same or go up, but house prices will fall while natiojnal debt is a problem.
The scenario painted probably isnt what you like to read. Just my opinion, trying to inject an alternative view to the discussion.
