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People need to be much stricter on what they mean my "pop". Australian property prices are cyclic with an upward trend. There are (substantial) cyclic decrease

by nl 5y ago

People need to be much stricter on what they mean my "pop". Australian property prices are cyclic with an upward trend. There are (substantial) cyclic decreases in prices, especially in Sydney[1]. But people who talk about "popping" property prices seem to believe there will be a massive (50%+?) fall in prices. But there are fundamental reasons why this is unlikely. The 2008 GFC causes a 16% decrease in prices in Australia[2], and it's hard to imagine something being worse. Prices recovered 10% the next year, because Australia avoided a recession and there is fundamental demand for living areas in out major cities. The GFC caused a 18% decreases in prices in the US[3]. Given that Australian mortgage rules are different (there is no ability to walk way from a mortgage in Australia, unlike the US) it's unlikely a bubble in Australia will "pop" worse than that. But 10% decreases occur relatively often. For some reason these are ignored, but the truth is these are the "pops" that take the froth out of the market. [1] https://cdn.propertyupdate.com.au/wp-content/uploads/2021/03/Price-growth-by-city.png https://cdn.propertyupdate.com.au/wp-content/uploads/2021/03... [2] https://www.theguardian.com/money/2009/jan/06/house-prices-fall-in-december https://www.theguardian.com/money/2009/jan/06/house-prices-f... [3] https://money.cnn.com/2008/12/30/real_estate/October_Case_Shiller/index.htm https://money.cnn.com/2008/12/30/real_estate/October_Case_Sh...

Clewza313 5y ago
By "pop", people mean something like the impact of the GFC on many parts of the US, where houses were underwater on their mortgages and getting repossessed left and right. There's also reason to believe that the Australian property market has decoupled from the rest of the economy, and that's because tax breaks like negative gearing incentivize buying properties even when it makes no financial sense otherwise. This could change overnight with the stroke of a pen, but it would take an awfully bold politician to do it.

by nl 5y ago

Clewza313 5y ago

By "pop", people mean something like the impact of the GFC on many parts of the US, where houses were underwater on their mortgages and getting repossessed left and right. There's also reason to believe that the Australian property market has decoupled from the rest of the economy, and that's because tax breaks like negative gearing incentivize buying properties even when it makes no financial sense otherwise. This could change overnight with the stroke of a pen, but it would take an awfully bold politician to do it.