House price crash? I was hopelessly wrong on house prices!

One of the most outspoken sceptics of Australian property prices lost a bet that home prices would fall 40 percent from peak to trough in 2009.

While the truth is that last year, capital city house prices rose by 12.1 per cent, hitting a new high, as demand from first-home buyers sparked a revival at the lower end of the market, while Australia’s strong economy bolstered the top end.

The second part of the bet – whether Australian home prices would drop 40 per cent over 10 to 15 years – “is still alive and well”.

Do you think house price crash will happen soon? I don’t!

Do you think house price crash will happen in 10 years? I don’t!

6 Replies to “House price crash? I was hopelessly wrong on house prices!”

  1. Without a doubt they will crash. House prices don’t make any sense from an investment point of view. Net yields are so low that highly leveraged owners can make a loss even after 6%+ rises year after year. Australia has been over 18 years without a recession. This has got to be near a world record. Recessions happen all the time in a normal economy. One will reach Australia soon enough and when it does the Australian housing market will turn into a disaster.

  2. Thanks for the comment.

    I think it is because you invest in houses – while I invest in apartments. Unless your investment property is a positive cashflow one, you will make a loss anyway.

    I don’t think you should only look at net rental yield. When the house price increases, your yield will decrease. Furthermore, I believe the appreciation of your investment property should be able to cover your current loss.

    I don’t think the market will crash because the recent forecast of the country’s population would boom from 22 million to 35 million by 2050. When population growth rate is higher than the housing growth rate, it is very unlikely that the house prices are going to dive.

  3. I think it will slow down a bit as people can not afford to buy and banks are tightening their criteria. The only main reason it will crash will be if those buyers who have a very tight budget suddenly lost their jobs as a domino effect of increased interest rate that will increase some commodity prices and result to cutting of expense of households which in turn has a bad impact on business which might close down and eventually somewhere along the line someone will loose a job and that person would not be able to pay their mortgage and will lead to a force sale. As the seller is desperate to sell, they will agree on a lower price.

    Migrants will think twice to go here if prices bacomes unreasonable and people particularly if US and UK will be more advantageous for them. I still believe there are more opportunity on those places than Australia. And some Australian residents might go somewhere. So, I think population here will not increase that fast unless of course Australia will accomodate Asylum seekers instead of getting skilled migrants.

  4. Um, what the hell is happening to house prices in Melb. Metro? Some people tell me the prices have come down yet when I make a lower offer I get laughed at! The prices still seem high to me. And what’s a good area to buy in for capital growth? I was thinking maybe Forest Hill, Vermont or maybe Nunawading? A house with large land? Or a unit or townhouse? Very confusing!

  5. Australian house prices are facing a perfect storm – see article below…

    Australian House Price Crash

    “One year ago there was utter denial the housing market was in trouble at all. Now the realization is starting to dawn on some smarter thinkers that something incredibly serious is underway, but as usual their belief (faith?) is that they can manage the fabled short lived ‘soft landing’. Well good luck with that is all I’ll say. The larger the boom, the larger the crash. The real estate boom that started in the late nineties began long and slow and over its course turned into the greatest housing bubble the world has ever seen. This bust that’s unfolding will be exactly the same. Hold on to your hats real estate speculators. As the year unfolds you’ll come to realize real estate in this country is dead for a generation or more. This bust will be a doozy.”

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