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And you have to admit, YM, we're starting to turn YOU on how property CAN (under certain circumstances, and you're more strict about this than I am) keep rising. (Namely, suburb creep, redevelopment and a decrease in property size). I've certainly sharpened my thinking from debating with you...

When you borrow to buy property, inflation isn't always a bad thing. Say property prices go up at the rate of inflation. The 'real' value of your property stays the same but the 'real' value of your mortgage is decreasing. Alex

Or when demand falls. Underlying demand to purchase only translates to actual buying IF people can get financing. If the entry-level people can't get as much financing because unemployment is high, interest rates are high and/or bank criteria are tight, that decreases demand. If people can't...

I really don't understand you, Kenneth. First you expect a Japan style 10+ year bust. Then you expect Australia to just get through this. Why not take the more reasonable middle road? We have a recession, take some pain, then have another boom in 3-5 years. Alex

I’m pretty sure Hong Kong has recovered since 97. Japan is an extreme case, and reflects both a bigger bubble and government intervention which prolonged the bust. There is, of course, a matter of degree. Just because you and I agree that there will be a bust doesn’t mean we agree on the...

While I believe that property goes up over the long term, keep in mind that it CAN fall for years. Those are the times when people lose heart, sell, or are forced to because they bought at stupid yields and can't pay their mortgages. While the stupid prices of yesterday seem like bargains today...

There were two voters for that, it seems. YM? It would be very unusual, but you can't discount the possibility. I personally expect about 5 years of stagnation. Alex

They managed to get on my ignore list after one post. Alex

I’ll still be buying, but in small increments (relative to my gross portfolio value) and in selected areas only. I don’t think it would be wise right now to buy with the expectation that a boom is around the corner. We may well see higher interest rates and falling property prices before the...

So, inflation from food and energy prices, potential US recession, tightening liquidity decreasing available loans, potential higher unemployment and lower consumer sentiment due to a recession..... you don't think any of these will impact the property market even in the short term? You don't...

Shadow, do you see ANY negatives for the property market in the short or even medium term (say up to 3-5 years)? Alex

There are still a number of things that can change. Allowing people to access their super for deposits, for example. Or, one that I prefer, allowing PPOR interest deductions and limit (or scrap) the PPOR CGT exemption. In the US they get interest deductions on PPOR but the PPOR CGT exemption is...

That would be the long term trend. Short term...... who knows. Alex

It goes down the line. ALL properties get more expensive. That's the ripple effect. Though long term it can keep rising, it won't be a straight line. Eventually there will be a recession, resulting in job loss and credit tightening. Then the market will stagnate or fall, maybe for years...

Yes, the 'trade up' effect is certainly one driver of property. Obviously most people can't go from nothing and suddenly borrow a mil from the bank. Those who are buying in the more expensive suburbs are most likely selling / refinancing existing property and buy a more expensive house with a...

And if we have a recession, how likely is a boom in the short term? Alex

My theory on what will drive the next boom, or at least create the conditions facilitating the next boom: a recession. Alex

Even when the liquidity crunch moves interest rates up and decreases available loans? Even Australian mortgage backed securities sales have taken a hit recently. Most people can't buy property if they can't borrow. Alex

Inflation isn't always a bad thing re investment property, because inflation drives the 'real' value of your MORTGAGE down as well. Alex

Note the difference between Shadow's and AMP's graph. Shadow's shows the last / current boom as moving the market back towards the long term trend. AMP's shows the last / current boom pushing the market AWAY from the long term trend (implying a period of low returns up ahead). Alex