I've owned property for over 30 years. I'm no Donald Trump, but always had one IP or more. Some years values drop slightly, other times they don't move up at all, other years they rise sharply and then plateau again and wages catch up, again. What is it with the 20% returns in one year. Is that for ALL the property in Australia????
Parts of Australia's property market are rising right now, others are dropping, others are in a plateau. You cannot lump ALL property into the same basket.
And it is 100% logical that property will be better than renting in the long run (.ie 30 years and give you a good return) even at modest rates of return of 3% at current prices after a 7 year period of owner occupation you have a really good return.
What I am arguing against is the belief that a 10% average return per year is appropriate for housing, or even a higher return on some properties is appropriate.
Aside from being morally reprehensible it is just unstustainable ..
IF those capital gains are assumed to be built into the behaviour of individuals in terms of their own willingness to pay (ie their valuation of the property), then we reach a point where the required return becomes so high that the next buyer simply cannot afford to service the debt.
At this point the price stagnates and as I've said earlier this would be as good as a fall as the 0% return assumption takes thousands and thousands off the value of the home.
This would obviously put our entire economy in the crapper and the government would most likely bankrupt itself bailing out banks (not a good prospect for a public servant like myself I mean I could probably work in private but the lifestyle up here is pretty good
).
So why I say risky, is because if we meet that point where required return cannot be reached without intervention, we're going to see things happen that haven't happened in a long time. What the result would be I don't know.
I'm not one of those spruking for a crash. I like to look at facts. I want to buy myself but am of the realistic understanding I really can't afford to buy much of anything at the moment.