in relation FHB 'cant afford houses - period' not sure what you mean as houses at the lower end are being snapped up. so not sure why. given the average FHB loan is some $215k on house worth some 300-350K, it seems that there are quite a few with good deposits.
Many FHB would be renting and paying $300-400 a week, so converting to home ownership is paying the same amount, so if they can pay the interest why cant they pay the mortgage.
as to the detoriating conditions, this is what some of the 'economists' supporters where telling us that after christmas there would be massive layoffs. The january employment figures indicated an increase in employemnt of 1200. We hope the that the stimilus packages will aviod recession. While 300,000 increase in unemployemnt is expected, 200k is from school leavers and the 100,000 from current employees.
So while i do expect things to get worse, i hope that australia aviods the recession.
and if interest rates stay low, can only help everyone with a mortgage. tightness in supply will also ensure that the rental market stays strong.
not sure of the 'different inflation' if building costs and materials rise, established houses will be effectively cheaper. If rates stay low, then there is a win situation in that you have an asset which hasnt appreciated yet, but will be worth a lot more in the future once the economy picks up and purchased using low interest rates to much the much higer costs. Hence the reason why people will buy now than latter .
As to yields on property increasing. I dont think they will rocket, rather move into a 'equilbrium' of some where close to the cost of buying equals the cost of renting. As to the price falls, this is the crux of the anti-property heros who beleive in the mesiah delivering 40% falls across thas is the case in the US. the current purchases are ensuring that price falls are being minimised at the lower end.
I have no problem of actually building in the current very tight rental market as this ensures a tenant and the current doldrums in the property markt also mean that you can purchase development sites at much reduced values combined with lower tradesmen costs. Again the market I am looking at is the lower end.
