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What lies ahead for the Australian Residential Property Market?

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Your Investment Property | 09 Nov 2011, 12:00 AM Agree 0
Leading property and finance analyst Bill Zheng provides an unconventional view of what the future holds for Australian property values and why our property market has not followed the declines of the European or US markets. Read moreā€¦
  • Don't Prop Up the Ponzi | 05 Jan 2012, 01:26 PM Agree 0
    You talk about the Australia's wealth but few citizens benefit from Australia's natural resources. Upon reading your example of the population here moving to Papua New Guinea 20 times over, I suppose if enormous numbers of Chinese millionaires and billionaires moved to Australia, then of course that would push the prices up, but they would largely be buying and selling to each other, as Australians would be priced out of the market forever. When Kevin Rudd relaxed the foreign investment scheme, he did it with the express purpose of propping up our deflating housing bubble. Along with huge immigration and tripling the FHOG, this worked a treat, especially with negative gearing in place, making properties even more unaffordable for average Australians.

    A $640k mortgage on a household income of $120k leaves almost nothing for spending, even for spending on essentials. I don't know how anyone could comfortably manage a mortgage of that size with an income of that amount, and still sleep at night. If there is no money left for spending, then retail shops suffer, and jobs are lost. If the $120k was reduced due to a job loss, then there is no way they could pay the mortgage. In fact, this is what is happening now. Retail businesses are doing it tough because there is less discretionary money available due to high mortgages on overpriced properties. How is this sustainable? Or are you saying that only the very wealthy can have their own homes, and the rest can never own their own home? Even if that was the case, and let's say the majority of Australians were to rent, then there is a limit on the rent that can be charged. When buying a property, you can increase your debt to infinity, but you can't borrow to pay rent. So if the rent is not keeping up with the price, then of course you can negatively gear. But surely there is a limit to how much taxpayers can continually subsidise rich investors just to ensure that their real estate is worth more and more? Yes, that is happening now, but there has to be a limit somewhere. But your argument would be that prices would just keep going up and up, based on speculation and enormous immigration while the actual rent return would be dropping. Well, that is what has been happening in this housing bubble built on debt rather than affordability, and that is why prices are now falling, because this Ponzi scheme is unsustainable.
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