what is the point?, page-32

""...So a x% drop across the while market is shear fallacy..."

I never said that. I am talking about a median drop (not disimilar to a median Melb/Syd price rise quoted by the RE industry). I don't care whether your property has diamond studded downpipes or gold plated electrical fuse box cover and a potential gold mine beneath your swimming pool."

Actually I recall in one of your posts you stated 40% across the board. As I said the MEDIAN is irrelevant most do not buy a median property. Also as I stated again price rises quoted on the median are also irrelevant as it may or may not have any bearing on your investment. Property improvements and area properties impact property prices and price changes allot and to state otherwise is very naive.

""..Most of the speculators that were in the market would have probably left by now..."

If this were the case, the median house price in melbourne woukd be $200K and the banks would be on life-support. Also how do you define what constitute a speculator vs a long term investor ? So, anyone who flips units are out of the market ? while the mum-and-pop investors (among them are teachers and nurses) ar all staying out and not having a single speculative bone in their bodies ? How long do you have to hold on to a property not to be classified a speculator (12 months or 12 months and 2 weeks) ?? Does someone who negative gears and hope for capital gains deemed speculative ??

You really have me confused."

Why on Earth would the median price in Melbourne be 200K etc just with speculators leaving - there is no justification for that.
A speculator is anyone only interested in short term capital gains - as for how long you have to hold well that is the million dollar question and uber bears tend to classify most real estate investors as speculators when the majority are not. Also just because you may negative gear does not make you a speculator, as you may have a long term hold strategy.

""...Time will allow rational thoughts to fully think through all options. .."

What if the rational thought is to dump and exit ASAP because you are trapped. Also when the crunch comes, time will be the last thing on one's side. I am sure if someone who has a few million spares can calmy assess the storm vs someone buried head deep in debt serving mulitple loans."

Now you are nit picking. As I said some may decide to sell but it will be after more thought, and yes there will be time to say there isn't time for a few days of thought is nothing more than scare tactics - this is not the stock market where prices can change dramatically in a matter of minutes.

""...And the vast majority won't need to liquidate their properties either..."

The initial process of downward housing correction was already in train until cash rates was in utter panic slashed from 7.5% to 3% in a flash. Then came Mega FHOG giveaway. This only bought time but made the matter much much worse (as we now have to confront)."

Sure money was tighter but there was no widespread defaults, and if rates get high enough to stop the majority of other spending then inflation will slow and rates will drop.

""..No they won't ask owners to top up as it is not in their interest to do so as they would make any down turn so much worse..."

I have answered this many time before. In rosy, plain-sailing blue-sky period, the (BIG4 - not your 2nd/3rd tier) banks will do their civic duty to provide breathing space. It's good PR. There is nothing worse than TT & CA airing folks getting kicked out in tears. When a pervasive house price correction occurs, the banks must protect their balance sheet. Bad debts in this scenario can quickly turn profitability to losses. Otherwise, their SP (and worse still their Credit Ratings) will tank. It's not in the interest or mission for the banks to be good samaritans."

Sure banks are not good samaritans but it is NOT in their financial interest to cause additional mortgage defaults because of negative equity when all required payments are being maintained. Again to say anything else is being naive and nothing more than scare tactics. Banks will always act in their interest and it is their interest to get all their money back and they have a higher likelihood of getting all their money back plus interest leaving things as is. Besides which if for some obtuse reason this began to occur I can see a nice government guarantee being put in place as again it would be in the government's political interest.

""...Then due to the way their loans are in the US many just handed their keys back because they didn't want to wear the negative equity..."

Only if we had jingle mail here, our housing crash here wouldn't he as horrific. In Australia, you end up losing everything. "
Actually it is a GREAT thing that we do not have jingle mail here as it makes owners more accountable for their actions and as such is a good reason why things won't be as bad here as in the US. The threat of losing everything is a great incentive to do everything you can to keep what you have!

"There is nothing the government can sensibly do (hence I maintain the CORNERED predicament of the housing market). The RBA also has it's hands tied. It may jaw-bone and talk down the propsect of rate hikes to soothe some nerves (while hiking regardless)."

Who ever said our Labour government was sensible?
As for the RBA having it's hands tied well if they wanted to they could let inflation go a bit higher for a couple of years - that is certainly an option and it wouldn't hurt that much and would relatively reduce debts. This could certainly done if a similar policy was adopted world wide.