world markets about to collapse, page-38

re: property about to collapse (not the markets) Hi Sabretooth,

I accept your mainland Europe clarification regarding The Netherlands.

On your point:
"But if you want to enter soon, I think you might as well wait, since even if there is a 20 yr horizon, you might as well buy a bit cheaper",
I will only be buying again once the price is right. That's why I have not bought more since 2002.

This will occur either:
1)
when prices fall, stabilise or moderate to an acceptable level;
or
2)
if I can find a property which satisfies my $/$ rule (don't buy if I cannot rent out for equal or better $ value).

As for a declining population, I do disagree with you on this.

Australia's population is growing by a net 250K per annum, and the previously low birth rate has (in the past few years) shown some signs of reversing (albeit, slowly).

Most population growth, however, is due to increased immigration.

On top of this, there is also ~1.0M temporary residents in Australia, attending school, at University, etc.

As for your comment:
"But as interest rates rise again, prices will come down and these people may eventually be able to afford",
I disagree, as (if memory serves me correctly), property ownership rates actually fell off significantly the last time interest rates rose heavily.

A $350K property, with a 10% deposit, and finance @6.5%, attracts $20,475 (or $1,706 per month). And that's without any allowance for principal reduction.

However, if interest rates rise to 10% and property prices fall by 20%, then the same $350K property becomes $280K, and the monthly interest bill (exlcuing any principal reduction) becomes $2,333.

A 40% fall in property rpices would probably reflect interest rates of >15%. Even here, the adjust property price would be $210K and the interest charges (exlcuding any principal reduction) would be $28,350 (or $2,362 per month.

More likely, however, under a 40% reversal, interest rates would again top 18%.

Affordability and serviceability, in these circumstances, would eliminate many more people from being able to buy property than is currently the case.