Dear Jim, most sure whether you understood what you wrote...

Dear Jim, most sure whether you understood what you wrote here:

'Throwing out the surplus on ill-concieved handouts and interest rate cuts won't help anyone pay back what they owe.'

Actually the spending of the surplus, and I do hope that it is on infrastructure such as new ports or roads and such things, does in fact allow you one to pay off the mortgage as it will provide additional jobs, and the flow on effects, to counter the loss of jobs as a result of the slowdown.

As to lower interest rates, again, less interest charged means that more can be paid off. Alternatively if those on the edge the rate reduction allows then to keep the home and payoff when times get good.

but Jimmy, following Keen with out considering his theories may not be right is fruagt with danger as he may have excluded factors that make his agruements valid.

I have to agree with Proffessor keen that there needs to be an equilibrium between the price of a house and the income and therefore housing can not go up at 10% a year. i was watching Skybusiness and some one asked about the parklea area in sydney. The response using RP data was that it had gone up 10% per year over the last 5 years so the future growth was likely to be the same.

Average price $458,000. parklea is an average suburb, for it to maintain 10% it will double in 7 years to $900,000 and this is using stats.

There is no way parklea can do this. The best I see will be that the current value increases some 2-4% based on growth in incomes in the area.

The current property market will soften but the compensation for a investor is that the holding cost will be less than the rental income giving a positve return of some 2% until the historic average, adjusted for structural change, comes to equilbrium. The govt/RBa should be given a hand in acting in a way of keeping people in homes, something the US hasnt done.

But reading about the UK problem, much of this has to do with their love in investing in the spanish holiday home and the collapse their and the flow on effects in England. The same is in flordia as many english bought holiday homes their.