Good post. Deflationary spirals are very nasty. I know so many folks who were rejoicing a rate cut cycle a year ago when I told them, this time it won't work - they didn't understand.
Rate cut (however useless) may be at an end as global inflation may start to rise as American comes out of a 7 year slump and Europe stablizes.
The expectation of lower prices results in would-be purchasers holding off and buy cheaper at a later time. This leds to an increasing over-supply of property to meet shrinking demands which puts more downwards pressure on prices.
This in turns spooks more investors (who have not yet sold after 2 yeras of decline being deceived and conditioned by property spruikers into complacency that at worst property prices plunges 10-15% or that vacancy rates tightens, immigration snowballs and that Chinese buyers from Shaghai are swamping suburbia across Australia) suddenly all in recognition of the inevitable head for the exit at the same time.
At which point, the faeces hit the fan with the banks as they too will ration loans to protect their balance sheet. Further constricting credit (reducing the amount of money in teh market even further) and a housing slump becomes a mother of all crashes.
