Kingy, I have been saying by the end of March, we will have seen...

Kingy, I have been saying by the end of March, we will have seen the onset of an established trend where demand signifiantly drops off (FHB and investors) but where supply will correspondingly increase (as more who are doubtful, fearful and wise - you want to hedge your risks by liquidating part of your property portfolio just when the mainstream media also starts reporting this "uncomfortable" news trend).

The crash happens gradually and gathers momentum exponentially thereafter. By end of 3rd quarter, housing crash / bust / collapse will be front-page bold-type headline news.

The vicious cycle of more selling pressure and fewer buyers will feedback into this loop (just like US subprime). Ironically, the US bubble was relatively mild compared to ours and much less prolonged (hence the massive fallout that policy makers from the Lodge to Martin Place fear).

Those who are owner occupiers may try their best to hold on until the day the sheriff from the council arrives to seal the door. Investors will jump ship the moment they smell blood. Given the huge participation (much more pervasive than even in the UK) in the buy-to-let market here - largely because of negative gearing, the stampede for the door will be frightening. Unlike shares, houses are the most illiquid asset there is. It not a matter of dumping it at short notice. If there isn't a buyer who fancy your property (at a time the buyer will be spoilt for choice) you will be stuck for many months and if your're lucky you will end up selling at a massive price discount to the prevailing market price of when you initially list it on the market months before.

This time everyone will be highly strung with fear for housing crashes have taken place recently in many countries. There is no sense of "it can't happen because there is no recession or double-digit unemployment". As we all know as per the GFC, housing crashes bring about recessions (not the other way around).

Trigger: Many economists including even those of the large retail banks would argue that a neutral cash rate setting is about 5.5% to 6%. At 5.5%, that's a 83% increase in interest rate liability. We are just talking about FHB getting repossessed en-masse. Household debt is so dire that many who bought in the last few years (with a relatively large mortgage by historical standards) will also be at risk of foreclosures because you can only use your credit to pay your mortgage so many times.

You may recall the mortgage stress and reposession spike just before the RBA dropped rates from 7.5% to 3% in a wink.

December quarter was the "sweet spot" where the FHOG was being phased out and rates only just starting to creep up. There was also good upward price momentum for the unwary herd to blindly follow. Dec quarter was always going to make good statistics (to be abused and exploited by the spruikers).