It doesnt matter much when you buy, the old saying of time in the market is more important than timing the market is very true. this is regardless of the type of investment, shares or property.
property prices may fluctuate a little and some markets that are over heated may come back a bit but IMHO not by much, certainly not anywhere near 40%.
As someone mentioned house prices are impacted by the cost of land and the cost of construction but there is much more at play...Investment return, ie rental return vs cost of property, tax position, availability of land, demand for homes etc. Why would a property drop in value if it is getting a better return then bank interest?
In my experience property prices in capital cities/suburbs tend to double every 7 - 10 years. This is regardless of when you enter the market. I believe this has not changed, the only thing that has happened is housing affordability has dropped.
This in my opinion will continue to be the case as inflation is kept at about 3% - 4%, this will keep wages under control but housing is going up by an average of about 7% - 8% year on year.
The gap can only get wider, wider gaps, less credit and higher house prices will mean long term renters. Long term renters will increase demand for rental properties and put pressure on rent prices.
I do not see this changing anytime soon, the government may introduce or expand first home buyer schemes, encourge more land releases and encourage banks to be creative with their mortgages but at the end of the day capital city land is a finite resource and supply and demand will decide the prices.
I know that in some markets overseas residential property has seen drops in some years of around 20% but in Australia we have a shortage of property and with the current slow down in building this is going to put upward pressure on prices not downwards IMHO.
