How long can the lies go on? Either Aussie home prices will crash or enter a long agonizing decline.
The largest investment of most citizens is their home. Funnily, this sector of the economy has the poorest statistics and the most lies told.
For first home buyers contemplating the Great Australian Dream, beware!
- Interest rates are at century lows. We may enjoy another few months of ‘accommodative’ rates, but like night follows day, they must and will revert to normal as the economy improves.
- House prices are currently 6 to 7 times average weekly earnings, when they are typically at three. Anyone taking on a mortgage without a large deposit and a substantial, secure and growing income is risking everything and may live, work and die for nothing but that mortgage.
- House prices in Europe and America have touched these levels and crashed. You can now buy a house, albeit of low quality, in Detroit for $US6,000.
These incontrovertible facts speak more loudly and clearly than any gold-toothed salesman’s pitch to get you commit your life to paying a mortgage on whatever property he is selling today.
Associate Professor Steve Keen, an economist at the University of Western Sydney, says he remains confident that house prices across Australia will fall dramatically in the medium to longer-term.
“The boost to house prices courtesy of what I call the first home vendors grant has been substantial,” he told the ABC tonight.
“It hasn’t only pushed up lower level prices below the $500,000 mark, it’s also boosted prices up to $1 million or more, because when those vendors sold their houses to the first home buyers they got an extra $30,000 or 40,000 in cash, which they leveraged up to an extra $200,000 to go and buy houses in the medium to high price range.”
He says this boost is only temporary and that Australia may experience a long slow decline in house prices of up to 40 per cent over the next 10-15 years, similar to Japan’s experience during the 1990s.
And if some pretty boy salesman tells you prices can only rise further, ask him to put it in writing. Hmmm. He declined, didn’t he?
For example, in Britain, agricultural land prices began falling in 1850 and continued falling for 90 years. They spluttered back into life in 1940, at one twentieth of their original price.
The ultimate irony is that government, politicans, bankers, real estate agents and economists know this to be true. Why are they mute? Why do none of them feel responsible for warning people of an accident ahead?
David Collyer
