ziro: "It is a very common fallacy that house prices go up, flatten out, then go up again- just ask any real estate agent.
This fallacy usually comes from the fact that the end of a housing bull market corresponds with much higher interest rates, so often while the 'physical' price of the house hasn't moved, in real terms it has fallen.
For example, if a house worth $500,000 levels out and doesn't appreciate in value for a period of say 4 years while interest rates are 15%, the dollar value of the house has stayed the same but the inflation ajusted value has dropped by over 40%. In other words, if you had sold the house for $500,000 and put th money in fixed interest compounded, your would have around $875,000 after four years, compared with the house still worth $500,000! This has been the case in the last number of housing crashes.
This scenario changes completely when interest rates are low. As there is little inflation to dilute house prices after bubble, the actual dollar value of houses go down.
This is why the Economist predicts Australian housing (not just speculative units) will fall by 30%.
The only way this won't happen is if interest rates rise very quickly, in which case the former scenario will take place once again.
"
The big key is interest rates I agree
The factor however is not that simple
I still do no see physical price of properties dropping unless the Australian economy turns sour
Artificially raising Australian interest rates (which so far my bank has not passed on) Interest rates in many places USa Japan are low. Australia is not the only lender (for many) and it's currency is going up
So far Australia is one of the very few countries which people can still expect to buy property in its Capital Cities. This concept is not a factor in many of our major trading partners (people more concerned about renting)
I however believe share prices will out perform property
