From their peaks in mid-1991 and mid-2006, the Japanese and US housing markets have tumbled. From Australia's peak in mid-2010 we could be on a similar track.
+Michael Poloni feel free to thank me for that, I been waiting since 2000 and always been joking that the moment we'll enter the market it will start going down... well we entered in June 2011... and I can see that event sharply depicted on the graph chart!! ;-)))
I think Australia house prices are at least 50% overpriced due to the influx of easy and cheap credit before the GFC. The average house price increased more quickly than average salary during this period and people stopped caring what a house was worth since it was assumed it would cost more next year and they would always get the money they were ploughing into interest repayments back when they sold. Take away the delusion of ever increasing house prices and actually consider that they can go down and then the money paid in interest is suddenly less appealing. Throw in a bit of increased unemployment due to jobs going off shore and global slowdown and there could be a rush to sell and a massive decline in house prices. Current house prices require double incomes which is another reason house prices rely on low unemployment. Imagine what would happen if interest rates were allowed to go up ?
Imagine what would happen if interest rates were allowed to go up ?