Here's my personal view on why I think prices will keep on rising:
1. FHBs are back to their 'normal' levels of approx 20% of the market and yet prices continue to rise.
2. FHBs get $3,500 less after 30 September and a further $3,500 less after 31 December. So $7,000 less in the hands of 20% of the whole market is going to do what to property prices?...Absolutely nothing in my opinion.
3. We have seen a steady increase of upgraders back in the market. Some months ago there were very few upgraders as investors were dumping stock onto the market that was subsequently purchased by FHBs. But now there are lots of upgraders, who have sold to FHBs, supporting the middle and higher end of the market.
4. Investors are making a re-entrance into the market. Additionally, recently published surveys have 3 out of 4 investors who intend to purchase, waiting for the FHO Boost to expire. When investors return to the market in greater numbers, what will that do to property prices, as they compete with each other?
5. The threat of interest rate (IR) rises seems to be having the effect of bringing forward investment purchases. Most lenders' serviceability calculations are done on present IR + 2%, “so, better to get more funds now while standard variable rates (SVRs) are at their low point”, seems to be a theme I hear coming through.
6. People who were held back by fear and uncertainty generated by media reports and interviews with people like Prof. Steve Keen, are beginning to see the folly of expecting 40% price falls. House price data from Residex shows Sydney property prices had “boom” growth of nearly 8 per cent in the past three months.
7. While-ever the share market is volatile, investors retreat to the relative safety of bricks & mortar.
8. Unemployment is not expected to get anywhere near to the levels first predicted. Gee - Australia did not even enter a 'technical recession' while the global financial markets were in meltdown.
9. Demand is still exceeding supply. New housing starts are improving but still weak as developers struggle to get access to finance. This has the effect of pushing up prices of existing stock.
10. Immigration levels are still high.
But you have to be convinced in your own mind (just am I am in mine). Having said that I have nothing to lose if I'm wrong. A lot of my IPs are cash flow +ve now and I really don't care what happens to the market. I have no control over it anyway.