Asset Price Meltdown Hypothesis

[tomd]

A few weeks ago there was an article in The Australian by economics writer Alan Wood, where he discussed what I think was called the asset price meltdown hypothesis.

Basically, the theory goes that at some stage in the future there will be lots of baby boomers selling assets to fund retirement and not that many kids around to buy them, so prices of assets could plummet. He gave four reasons why the effect would not be so dramatic, including the wish by boomers to leave assets to children rather than sell and the wish to have some assets left until death because nobody knows how long they'll live.

However, he seemed to support the theory overall, saying that people will still want to sell some assets to fund retirement.

One factor he didn't discuss was the effect of immigration - I thought immigration was what kept our population slowly growing in spite of falling fertility.

Has anyone got any thoughts on this? It is a concern for anyone such as myself who is still highly geared and yet to make large capital gains on property (apart from my PPOR).

[Aceyducey]

Tom,

It is a definite possibility if you follow population trends in Australia to their logical conclusion....

The situation is even worse in some european countries like Italy.

What to look for is whether governments manipulate immigration to manage this possibility - and to cover the rising costs of funding the lifestyle & health of an aged population.

My anticipation is that as time goes on we'll see Australian governments open the doors to greater immigration levels in order to both maintain Australia's population AND begin shifting the age balance towards younger people.

If these events do not occur I fully expect that at some point in the future Australia will reach the point where it can no longer adequately fund and man critical services & defense and we'll be invaded by another country with a young and growing population.

Cheers,

Aceyducey

[Bear924]

I guess we shouldn't forget John's new retirement policy for the masses.... that is that you never retire, you just keep on working till you drop. If baby boomers don't have enough to retire on comfortably and government assistant maintains its present standards (I can't see otherwise) I believe a majority will keep working so that they can maintain their desired lifestyle for a long as they can. When they eventually are so worn out that they can no longer do the 9-5 grind they are probably close enough to the pearly gates not to need large amounts of retirement income. As most of the work still appears to be in the cities I imagine that most baby boomers will still need to live in the cities and this will reduce the asset meltdown of these cities.

I actually wonder if we won't see many baby boomers retire for a few years and then realise that they can't afford retirement. Once this realisation occurs I'd imagine many could start moving back into the workforce. This obviously brings up questions regarding training etc however who knows, maybe Maccas will stop recruiting 16 years olds and start recruiting 60 year olds.

p.s. Please note that I'm only having a bit of a dig with some of my baby boomer comments, I actually think that many baby boomers have a lot more to offer then they probably realise. Looking around at many of the businesses where I live I actually wonder what going to happen to basic services (eg doctors/ trades etc) once their owners retire and their business shut up shop.....I can't see any young people ready to take up the slack.

[oceangirl]

Here was an interesting article in the Australian Financial Review re IMF report on potential asset bust:

http://afr.com/articles/2004/04/22/1082530274715.html

Would be interesting to hear people's views on this.

Cheers

Oceangirl

[Aceyducey]

Here was an interesting article in the Australian Financial Review re IMF report on potential asset bust:

http://afr.com/articles/2004/04/22/1082530274715.html

Would be interesting to hear people's views on this.Oceangirl,

The IMF are basing their report on older data - in certain cases over 12 months old.

Go to the source & check: http://www.imf.org/external/pubs/ft/weo/2004/01/index.htm (reference page 11 & 18 of Chapter I for the specific comments discussed in the article)

The gate's already shut & the horse didn't bolt.

Cheers,

Aceyducey

[L Bernham]

If the IMF mentioned overinflated asset prices in Australia based on prices from 12 months ago. What would that make the todays prices - Even more overinflated??

Was the last few months of last year merely the traditional "suckers rally" seen at the end of most booms (as the final desperate few jump in at whatever price)?

Please note this is a question not a statement.

LB

[Tim]

The statistics from books I have read on investing suggest that very few people are going to be financially indepedent (like around under 5%).

If this is the case, then where are all these assets that the baby boomers would have to sell? They wont be rich enough to have many statistically speaking.

Also the bookk 'Prophecy' by Kyosaki suggests that this will occur with shares, as in super funds will be drawn on and shares will be sold off to fund the super drawdown.

I tend to think there will just be less money around overall after the baby boomer retire..........

TImbo

[Aceyducey]

The statistics from books I have read on investing suggest that very few people are going to be financially indepedent (like around under 5%).

If this is the case, then where are all these assets that the baby boomers would have to sell? They wont be rich enough to have many statistically speaking.
Timbo,

Those stats are based on old data.

The situation has changed. People today are much more actively investing in their future than past generations. Household wealth is up - even considering the fact that debt is up.

I believe that 5% figure will be significantly higher in 20 years.

Cheers,

Aceyducey

[simonjulie]

Hi All
Interesting topic.
I was reading an article in a LA newspaper the other day which stated that young Californian families shunning the inner city lifestyle and opting for a house on their own block of land even if they have to go out to the back blocks to find one to suit their budget.
It seems that the inner city lifestyle trend may have been just a good sales pitch that worked for only a short time.
Let's get real here. There is only X amount of desirable land on this planet and if we can manage to own/control some of it ourselves then its value will always be at a premium and we will be smiling.
Kind regards
Simon

[L Bernham]

I agree - what we should try to avoid though is assuming that because there is only X amount of land on the planet, that it will get to the stage where there is none left in our lifetime.
What can happen when too many people believe this, investors pay any price they can to secure this land. Not just for themselves but enough so that when it does "run out" those who missed out will have to pay any price these investors demand because there is none left! Or thats their plan anyway.
I'll have an acre for me and another acre for the poor dude that can't afford to buy now but will be forced to pay even more in a few years time.

What really happens, is that rather than pay the very high prices that are demanded for existing bits of land and houses, the new entrants to the market move to where they CAN afford - further out. This creates jobs, growth etc and new towns and cities are eventually born. This effect can be seen happening around Brisbane where they are planning/developing a whole new city/CBD area (around Springfield). In some cases these locations within the old CBD become poor and crime sets in and this affects property values in these areas. There are many US cities where this can also be seen.

My first paragraph scenario occured during the land boom in Florida in the 1920's where the expectation was that Florida, was going to expand rapidly due to population growth and increased tourism etc. Everyone was getting in on it - buying some land for themselves and then getting greedy and buying more to sell to the next despro who didnt want to miss out. The investors figured - it doesnt matter much what I pay because as long as people are moving here I'll be able to sell it for whatever price I demand. The thing is that even though this population growth continued (to this day), values couldn't be sustained because they were too far above reality. It was around 1955 when the capital growth that had been factored into prices finally caught up to the prices of 1925. I guess this proved the theory that if you hold long enough you will always make a gain. Or maybe it just suggests one should only go for cash flow positive investments to ensure they can hold the investment for the next 30 years if prices fall. :)

LB

[spark]

I tend to think there will just be less money around overall after the baby boomer retire..........

That's interesting - "less money" generally? If so, then not only RE prices are supposed to drop, but the prices of services and goods as well... But what does it mean? If you divide a price of an average house by the price of an average hamburger/haircut/car, is there a reason for this ratio to change when "there is less money around"?

Please don't get me wrong, I did not abandon my bear views on Australian property - the issue is not in how much money (i.e. number-nominated-dollars) an asset is worth, but how relatively dear or cheap it is comparing to other goods and services in a given economy.

[Thommo]

My first paragraph scenario occured during the land boom in Florida in the 1920's where the expectation was that Florida, was going to expand rapidly due to population growth and increased tourism etc. Everyone was getting in on it - buying some land for themselves and then getting greedy and buying more to sell to the next despro who didnt want to miss out. The investors figured - it doesnt matter much what I pay because as long as people are moving here I'll be able to sell it for whatever price I demand. The thing is that even though this population growth continued (to this day), values couldn't be sustained because they were too far above reality. It was around 1955 when the capital growth that had been factored into prices finally caught up to the prices of 1925. I guess this proved the theory that if you hold long enough you will always make a gain. Or maybe it just suggests one should only go for cash flow positive investments to ensure they can hold the investment for the next 30 years if prices fall. :)

LB
This is the "greater fool" theory. It may be foolish to pay these prices today, but tomorrow there will be a greater fool who will pay even more. Most recent event was the .com boom but they all end in tears. You'll have to make up your own mind whether current RE prices fall into this category.

Thommo

[Lplate]

A few weeks ago there was an article in The Australian by economics writer Alan Wood, where he discussed what I think was called the asset price meltdown hypothesis.

Basically, the theory goes that at some stage in the future there will be lots of baby boomers selling assets to fund retirement and not that many kids around to buy them, so prices of assets could plummet. [snip]......


tomd
I think a lot of these fellows borrow from a writer on Canadian demographics who said this.
The opinion was fashionable for a while. Been challenged though. I'll see if I can find the orig book title.

Oz low fertility rate is of concern though and younger forumites should concentrate on indoor activities other than renovation to help the nation out!

Lplate

[Lplate]

The book could be Boom, Bust and Echo by David K. Foot with Daniel Stoffman

In the US some have sensationalised the opinions therein. For instance, that the stock market will collapse because no-one will be there to buy the shares that boomers bought. Also that the shares were grossly inflated in value anyhow through heaps of boomers buying them. Not quite what the book said from memory.

There is a follow-up which I have not read as yet (maybe others have read it?) - Boom, Bust and Echo 2000 - Profiting From the Demographic Shift in the New Millenium. It should take into account more recent learning and the constructive criticism of the first book (which was a good read).
Lplate

[Aceyducey]

This is the "greater fool" theory. It may be foolish to pay these prices today, but tomorrow there will be a greater fool who will pay even more. Most recent event was the .com boom but they all end in tears. You'll have to make up your own mind whether current RE prices fall into this category.In certain places this may be true - ie: inner metro apartments where investors make up 65% of purchasers.

However in the mass of suburbia where homeowners are the predominant purchasers I doubt this holds :)

Interestingly the loan figures overall used to say 'oh no investors are borrowing all the money' do not differentiate between new loans, and top-up loans, thus a substantial proportion of new investor loans are quite possibly simply top-up loans for capital improvements, leveraged 'no cash down' purchases, removing of cross-collateralisation as property values support one loan one property, loan conversions to better loan products, interest rate fixing and the conversion of equity to income via annuities.

I'm sure there are other cases besides this, thus I have no trust whatsoever in these figures.

Unfortunately the actual number of purchases of IPs versus homes is not recorded by agents and thus it can not be measured empirically, but generally is just a figure estimated by someone with a limited view on the market. So these figures are not trustable either.

So building any 'greater fool' theory (which is much better applied to the stock market where the figures are collected and measurable) and applying it to Australian property is very dubious statistically.

BTW: The theory was stated and reported a number of times about Sydney and Melbourne property prices before Federation as well as periodically throughout the 20th Century & as yet has not come true ONCE.

Cheers,

Aceyducey

[Peter 14.7]

Hi All

I also have seen these "meltdown" theories and many as based on the connection that Baby Boomers (BB) cashing in super funds and sending shares to the wall.

At first I thought, yeah, this is bad, but only tonight Stateline ABC run a story that showed the reality of what will and is happening.

LAW OF MONEY
Like the law of energy (energy cannot be created or destroyed but changes in form) Money cannot disappear (disclaimer: I accept you can actually physically destroy money if you are so inclined) but money essentially moves to someone else’s pocket.

Back to Stateline. They ran a piece on my old home 88 to 95 of Coffs Harbour. It talked about BB moving in and no doctors/nurse to support them. A study worked out they were all going to return in 15 years :eek:

Solution? The local TAFE and Uni have started medical courses to meet demand to serve the aged population moving in, living longer but needing medical repairs. Ramsey Heath Care and Astoria (developer) are not building housing estates but integrated aged car housing. :)

Outcome...the cycle of money starts!

BB money is given to doctors who pay insurers/builders/staff and doctors wives/mistresses who pay hairdressers/retailers/jewelers/car manufacturers/divorce lawyers. :rolleyes:

Insurers send money to head office in Sydney who pay staff/shareholders/government taxes/office rent. Shareholders cash up and move to Coffs Harbour when old!

So what does this mean?

EFFECT ON SHARES
Yes BB will cash up and take their super. Possible outcome, shares in Dell will drop as fewer workers equal less buyers of desktops, but shares in Heath Providers will rise as they profit from the sea change and caring for pensioners living longer.

The trick is to look for the companies who will ride this boom.

50 Years ago who had shares in Microsoft, Cochlear, Dell? No -one ...they did not exist. They had shares in mining companies now closed down, retail groups overtaken by the mega retailers, dead car makers (Leyland P76 anyone).

At what about jobs.

EFFECT ON JOBS
The same for jobs. Remember the fear in the 80's "there will be no jobs as computer will take them all"? yes computers has meant the work of 10 typists are done by 1 office worker, movie tickets are sold via the internet and phone, etc. but for every job gone 1 or more was replaced.

My dad was a qualified Boiler Assistant. I think it meant he maintained boilers (whatever they are). Today he would be a handyman repairing chilled water coolers in olds folk’s homes. He would use electronic tools to find faults and replace the parts rather than make them or trash the unit totally and provide a new one.

The job remains the name is changed. More and more jobs are service industries and yes we now have a GST to cash in on it. ;)

EFFECT ON PROPERTY
Ok here is gets more difficult. With CBD die? Will suburbs be valueless? Yes and no. There are too many variable here to list but to be short IMHO until someone invents tele-transporting the need to be close to where you work will remain.

So, if the work in is the CBD that's were people will want to live and will be paid best. Sure some jobs exist where location does not matter but most jobs are still face to face so to speak.

I may get my IT support from India but my morning coffee is made around the corner.

Regards, Peter 147

[geoffw]

Sorry, I respectfully disagree with your law of money (was that crawling enough?).

You work, you add something of value to the community- you are creating something. A community, country, or world, consists of many people doing this. They all add v alue. The people all become better off.

Sure, some are only involved with the exchange of money (say, gambling as one instance), but there's enough producing new stuff to make everybody better off.

I have heard (and I've mentioned before in the forum) that the Spanish discovery of gold in the New World ultimately made them poor- and the rest of Europe rich. They spent their gold on furniture, carpets, houses, paintings and the like.

The rest of Europe obliged- and build themselves skills to service those needs.

Spain lost a lot of skills as a result- and the rest of Europe became enriched as a result of having build up the skills to produce what Spain initially- and the rest or an enriched Europe later- demanded.

Perhaps the BBs are the new Spain?

(I speak with all the authority of a science/IT bod having read a little too much popular press)

[see_change]

The medical staff they were training were Nurses.

No additional Doctors are being trained in Coffs.

They are seconding Medical students to contry areas as part of their training in the hope that some will stay there. The reality is that most Medical students have no interest in working in country areas , with a possible exception of a couple of years to gain more experience.

They have started a bonded program for HSC students to get into medical school , if they have lower marks, and are prepared to go into regional areas.

I've already heard the AMA complaining about conscription.... I can imagine some will even go to the length of going to NZ and England rather than practice in regional areas :rolleyes:

See Change

[Aceyducey]

I've already heard the AMA complaining about conscription.... I can imagine some will even go to the length of going to NZ and England rather than practice in regional areas :rolleyes: The AMA IMHO doesn't have a long shelf life without significant compromise.

When we reach the stage of regional areas with insufficient medical care the government WILL step in to break that monopoly. It will only take a few media-publicised deaths to bring down the AMA...after all doctors have built an image of themselves in the community as caring hardworking individuals - and at the same time are sometimes seen as incredibly wealthy and in some senses arrogant....a few deaths would sway public attitude towards the arrogant viewpointand away from the caring.

Either we'll see it much easier for foreign doctors to get registered - on the basis that they practice where the government tells them to for the first five years OR we'll see that conscription-based rotation by doctors governed by the Federal Government.

We even have a doctor shortage in Canberra ATM, and the doctors here are well over the median age of doctors in Sydney/Melbourne.

It's simply an area that MUST be addressed - particularly with the older, more likely to need care people flocking out of major metros atm :)

My two cents.

Cheers,

Aceyducey

[Peter 14.7]

Sorry, I respectfully disagree with your law of money (was that crawling enough?).

You work, you add something of value to the community- you are creating something. A community, country, or world, consists of many people doing this. They all add v alue. The people all become better off.

Sure, some are only involved with the exchange of money (say, gambling as one instance), but there's enough producing new stuff to make everybody better off.

I have heard (and I've mentioned before in the forum) that the Spanish discovery of gold in the New World ultimately made them poor- and the rest of Europe rich. They spent their gold on furniture, carpets, houses, paintings and the like.

The rest of Europe obliged- and build themselves skills to service those needs.

Spain lost a lot of skills as a result- and the rest of Europe became enriched as a result of having build up the skills to produce what Spain initially- and the rest or an enriched Europe later- demanded.

Perhaps the BBs are the new Spain?

(I speak with all the authority of a science/IT bod having read a little too much popular press)

Good points Geoff but I still think my law applies.

All business is simply money transactions for goods and services. Even now, I am paying optus to link up and DELL a little for the computer I use, Integral Energy for the power to run the computer and Council rates to sit in a home to write my reply. My personal overheads are always there.

I think the spain example whilst valid then it not so now as now the rich Spaniards can buy shares in the German furniture manufacturers and reap some rewards from thier gold. I assume back then a country/individuals wealth was only what it could find and take (gold) grow, mine, build or export ( schooling).

Today someone could sit in Tassie never work and enjoy the fruits of a CPI proof income stream if managed well enough.

As for my law I an trying to say that the fear is the BB take their money out and market declines. But what do they take it out for? To spend. And it has to go to someone when they do plus 10% GST to Gov. As they spend they develope industries that grow and list shares. Evenutually the money return back to the start.

As stated I lived in Coffs Harbour and it has a healthy industry in locally driven industry in retail, cars sales, boat sales, fishing gear sales, and ride on mowers. The BB either retire to a beachfront and fish or acres in the hills and spend all their time gardening! As a non green thumb I never understood the attraction?!?!

What it does not have is the massive opportunity of Sydney and that is why local kids and myself move to the big smoke. Funny but when you are brought up on sand and surf, the beach lifestyle starts to wan in attraction.

On Doctor Training. I acknowledge oversight here. But their is nothing stopping them doing it in a few years. THe Uni is only around 10 years old anyhow. Studies say that if local kids can study locally, and get work, they often stay locally.

On the AMA I have no informed comment to provide.

Regards Peter 147 :)

[see_change]

The AMA IMHO doesn't have a long shelf life without significant compromise.

When we reach the stage of regional areas with insufficient medical care the government WILL step in to break that monopoly. It will only take a few media-publicised deaths to bring down the AMA...after all doctors have built an image of themselves in the community as caring hardworking individuals - and at the same time are sometimes seen as incredibly wealthy and in some senses arrogant....a few deaths would sway public attitude towards the arrogant viewpointand away from the caring.

Either we'll see it much easier for foreign doctors to get registered - on the basis that they practice where the government tells them to for the first five years OR we'll see that conscription-based rotation by doctors governed by the Federal Government.

We even have a doctor shortage in Canberra ATM, and the doctors here are well over the median age of doctors in Sydney/Melbourne.

It's simply an area that MUST be addressed - particularly with the older, more likely to need care people flocking out of major metros atm :)

My two cents.

Cheers,

Aceyducey

Acey , it's nice to think that that would happen , but I think you over estimate the social consciousness of Doctors as a whole.

They are a self interest group like any other such group in the community. In order to get into medicine you don't have to pass any tests in ethics or social awareness. All you need to do is to work hard enough and be smart enough to get the marks at HSC to get into Medicine.

Obviously there are some very social aware / competent Doctors , but as a whole they are no better or no worse than most other group in the community. I think the track record of the Doctors on this forum would bear testement to that . From my year I am aware of three who have spent time in Jail.

See Change

[geoffw]

I think the track record of the Doctors on this forum would bear testement to that . From my year I am aware of three who have spent time in Jail.

See ChangeThree doctors on this forum who have spent time in jail?

I'm only aware of two doctors (well, one current) on the forum. Does that mean you've spent time in jail? :D

[geoffw]

Peter,

Money is generated because people continue to produce things.

I go to work, and I produce something which my employer finds of value. I get paid.

OK, in a place like Coffs, there's a lot less active production. Many people there have spent most of their lives "adding value"- that's why it now looks as if the local economy is just exchanging money.

But the people supplying the services are doing the value add. The shops, the stores, the fast food places- all of these have people working, and adding value to the community as a whole. The things the people are buying have to be produced by someone- farmers, manufacturers and the like. That's what drives the economy.

[Spiderman]

OK, in a place like Coffs, there's a lot less active production. Many people there have spent most of their lives "adding value"- that's why it now looks as if the local economy is just exchanging money.

But the people supplying the services are doing the value add. The shops, the stores, the fast food places- all of these have people working, and adding value to the community as a whole. The things the people are buying have to be produced by someone- farmers, manufacturers and the like. That's what drives the economy.

Assessing economic activity is a funny thing.

Thus if we do our neighbours washing (for a charge), the economy grows as services are transferred from the private (household) to the public (economic) sphere, even though the amount of work that gets done remains unchanged*.

* it could actually be slightly less as the less well off can't afford to do their washing as frequenty because they have to pay. Activities that are necessary but can't be paid for thus don't get done. However if washing was done less frequently, you can expect some knock-on effects, eg increased sales for purveyors of undergarments!

If all owner occupiers sold their homes and rented to their neighbour, again there would be greater economic activity in industries such as property management and home maintenance. However assuming constant incomes, this would be at the detriment of other industries (eating out, pokies, clothes, etc).

So much economics seems to be arbitrary. What is regarded as activity or growth is often just rebadging of activities that were previously performed without payment. Thus I am always skeptical of claims that X will create Y jobs or Z will save money.

Peter

[Peter 14.7]

Hi Spiderman & Geoff

I am enjoying our debate but are we are starting to agree and we don't know it.

So I will put the alternate case that we could have an meltdown driven by BB.

I assume the fear is BB retire and want their super. It is in shares, so shares are sold and if there is not enough buyers, supply exceeds demand and the share price drops.

But what will BB do with their super cash? Ok if they invest overseas Aust will suffer. But that on mass is very unlikely and fraught with exchange risk.

So, BB have 3 investment options. Shares again, Property, or Cash.

If they swamp the banks with cash it is because they are not buying anything. The ecomony slows so the RBA lowers rates and because the banks are cashed up they offer very low loan rates which encourages business to build aged scooters to serve the once mobile BB.

If they swamp property again supply exceeds demand and rents drop and lessees enjoy lower cost of living.

IF the swamp shares they are back to the start again.

As I see it the money goes around hence the law. Perhaps if we not in agreement can you list an example where the money law fails?

Peter 147

Any comment from our wise Pitt St. :)

[Aceyducey]

OK - where does baby boomer super money go?

It gets spent on lifestyle.....not investments

Most baby boomers have negligible share & IP assets asides from super. I can't see that changing a great deal over the next twenty years.

The risk is when lots of them sell up simultaneously (unlikely)....it is likely to take the next 20-30 years for babyboomers to filter out of the market - that's not an amazingly big hump in any one year, month or day over the current situation....and if they sell, they have to do something with their money!

Some asset prices will fluctuate - however provided Australia is diligently matching immigration to keep the population on a slow upward incline, the market should be able to absorb it.

Cheers,

Aceyducey

[Peter 14.7]

OK - where does baby boomer super money go?

It gets spent on lifestyle.....not investments

Most baby boomers have negligible share & IP assets asides from super. I can't see that changing a great deal over the next twenty years.

The risk is when lots of them sell up simultaneously (unlikely)....it is likely to take the next 20-30 years for babyboomers to filter out of the market - that's not an amazingly big hump in any one year, month or day over the current situation....and if they sell, they have to do something with their money!

Some asset prices will fluctuate - however provided Australia is diligently matching immigration to keep the population on a slow upward incline, the market should be able to absorb it.

Cheers,

Aceyducey


Agree totally. In fact if you retire at 65 and the average life is 73 years long you're only got 8 years to blow it.

I acknowedge some retire early and some live longer.
But acey is right. The BB will filter out and others filter in.

Invest in boat builders or oil to run boats I say. ;)

Peter 147

[noddy]

In all the property presentations, I see the 90% of retirees will depend on the pension. With the workers/retirees ration dropping from 20-1 ten years ago to 5-1 now and expected 1-1 in ten years time, maybe we should be looking at the 70% who we think can fund themselves.

If the govt has insufficient money for the pension, then we will see further extention of working life, part-time access to super, and then the inevitable, sell the family home as a reverse mortgage to fund day-to-day living. The Commonwealth Bank has already started this trend after getting the higher incomed people all spent with "equity-mate", they can see the BB's needing the reverse mortagege as becoming a standard plank in retirement and have developed the product accordingly.

The doughnut theory of the baby boom is that a small number of wealthy retirees will be located in the inner suburbs, the outer-outer suburbs populated by people unable to afford the middle or inner suburbs; and finaly, the middle suburbs having a price collapse as the baby boomers who are owner-occupied living in $500K properties find no buyers and the price drops to the outer-suburbs prices to bring the buyers back.

Melbourne with their containment strategy, although pushing up land in the short-term, may be less likely to be impacted. Perth on the otherhand, spreading as far out as possible, may find a lack of people wanting to live in the increasingly owner-occupied vacant middle ring.

It will be interisting to see the owner-occupier vs invester ratios over the next 5-10 years.

Noddy

[geoffw]

I've heard one theory that, as the baby boomers start to realise that they have not provided well for their retirement (as a BB myself, I realised this some years ago myself, but did not see a way out)- they start to invest ion property in a big way- possibly leading to the3 next boom cycle being much bigger than this one.

But then, as the reality of supply and demand hits home, it could lead to a huge bust cycle.

I think we've seen the effects of an investor led boom so far- a similar cycle to this one, but magnified seems at least plausible.