Hi
Rolf. You indicate stock and demographics or supply and demand as a major factor to hold the prices of property for a few months and then an upward trend, although you do mention housing and strata stock in a unique position.
I think that supply and demand play a major role along with the vacancy factor. Reports also indicate a surplus of stock (generally, broadly but not specifically) in Melbourne and Sydney for up to 18 months, Adelaide for two years, Canberra for 2 to 3 years and Hobart for up to seven years. Hence my belief that the flattening of the market will run longer than several months.
Kevin. You have probably read the article in the Dec/Jan API written by Michael Carmen comparing interest rates today with the late 80’s. He wrote that when the nominal interest rates in the 80’s were 17%, CPI growth was 8% for a net increase of 9% overall. Today we have a nominal interest rate of 6.55%, CPI growth of 2.9% for a net of 3.5%. (ABS 1350).
Perhaps to state the obvious, a net of 3.5% is a lot less than 9% so I don’t see even a moderate interest rate increase occurring, a la the late 80’s, and having a major effect on housing. Yes, some perhaps, but I suggest not major.
Brinkdude. A good question. How long? My bets are on for a period of soft prices for the rest of this year less CPI rowth. This will allow the rental market to catch up.
My feeling is that the vacancy factor must fall. The rental yields must close on housing sale prices to nearer to 5% to 5.5%. The supply of housing must reduce.
Externally, the stock market must cease its downward trend both locally and internationally. George Bush’s new trillion dollar economic program must bite and the rest of the world stock markets must stabilise.
But then I guess we don’t as individuals have much influence on any of these factors. We can only bob around like corks in a whirlpool and make the most of the situation.
Regards
Ross