Property Market Crash?

[Just Me]

I also second what Olive said. What America did was CRAZY! They went for the whole 'every american deserves a home' stance and I think lots of people were mortgaged 3 or 4 times over what their house was worth. Lehmen Brothers, Franny Mae and Freddy Mak (the institutions that collapsed and kicked off the financial crisis) were pretty much set up by the gov't to give Americans any amount of credit they wanted regardless of whether they could pay it back or not. It was a stupid stupid economic move. Of course those institutions collapsed because people couldn't afford to pay the money back and once they feel over, so many other banks panicked and did the same thing. They all wanted their money back and people couldn't afford it which meant there was a massive surplus of houses which is why houses were selling for as low as $7000. There were just so many that people couldn't afford and the market was flooded. I don't see things becoming that dire here because we have lending laws that protect us.

Also in America, people can walk away from their houses without having to pay the money back or taking any responsibility for their mortgage. This is a huge difference as well.

Interest rates in America were also very low (less than 1%) and the UK was the same. When the GFC hit, they had nowhere to go with interest rates which is why they suffered so badly with it and why their property and lending markets did as well. Australia, thankfully, had interest rates around 4% (from memory) but we had room for our interest rates to go down which is what kept our heads above water. We are still above water now.

Some economists have been predicting a second GFC though based on what happened - because America has continued to borrow and borrow and borrow. George Bush, as president, borrowed more money than all the presidents before him combined and Barak Obama has borrowed more than George Bush and all the other presidents combined. It is some phenomenal amount everyday with no way of paying it back. It is kind of scary. But our interest rates seem okay and the Reserve Bank is trying to keep inflation under control (even if the ALP is trying to drive up inflation to pay back Australia's astronomical debt) but we should be okay if another GFC hits.

I think the property market will suffer a little, but I don't think it will crash. I would say that it is not a good time to be selling and to hang onto your property if you can afford it. Ride it out and things will even out with wages/cost of living/economy in a few years.

Anyway, there is a little video (about 40 mins) that explains it all. I will see if I can track it down and put up a link. It is really really interesting.

[Just Me]

Okay - found this video. It's not the one that I was thinking about that explains about the american government involvement but it does explain the american housing market and if you watch it, you can probably see why we are not at risk of things crashing.

It is a bit slow to start with but it is very informative and to the point ... ‪Global Financial Crisis Explained‬‏ - YouTube

[helle]

we have our house on the market at the moment, so i have given this alot of thought. the market at the moment is super ****e.

we bought our house three and a half years ago, we were 19, it was going to be our starting point so we could do it up a bit and sell for a bit of a profit and then build our dream home. We gutted it, pulled out lino and replaced with tiles, put in a new kitchen and bathroom, repainted EVERYTHING, added a patio with decking front and back, a 6x6 shed with extra concrete bit to add on a lean too if we ever wanted to, bore with automatic retic, solar hot water system, split system heating and a wood fire and put up a new back fence.

all up we have probably made $50,000 worth of improvements (but it was more like $30,000 as we did alot of the stuff ourselves so cut out labour costs). When we got the real estate agent to valuate, he valuated it only $10,000 more than what we paid over 3 years ago, after all those improvements. We have ended up putting it on the market at a price that allows us to get our money back that we spent and break even (so we aren't out of pocket, but we haven't gained anything either), and we're crossing our fingers tight that someone loves it enough to pay that much. I don't know if it will completely crash here, But yes, the property market isn't pretty at the moment and it hurts.

[Rivlas]

The market here and in the US, Uk & Canada is a repeat of about 20+ years ago. Droves from overseas were walking away from their homes due to the the money market. Interest rates 30+ years ago here were 17+% and it was hard paying off a house on those rates. It took a few years to turn around and for interest rates to drop.

I think in the next few years we will see the same thing happen here again where prices rise and jobs are few. Things seem to go in circles. As there is talk of interest rates going down in the next few month and stamp duty changed you will see more buyers around.

[Phteven]

the market will only crash if a lot of people have no option other than to sell for any price they can get. Most vendors are selling because they want to move not because they are out of options.

[helle]

the market will only crash if a lot of people have no option other than to sell for any price they can get. Most vendors are selling because they want to move not because they are out of options.

this is true. we're selling beacuse we need a bigger house, we're hoping to build.

still a right PITA tho ><;

[Cherished]

Thanks for all your input girls. Lots on interesting points. Re 100% loans, Australia totally gives 100% loans and then offers credit cards with loads of credit. There are hundreds and thousands of Australians in debt up to their eye balls and my mind always boggles as to how they are managing to pay their bills and live the lifestyle that they are living. The answer is they are living off of credit which is growing and they are digging an even bigger hole. Then there's loads of other people who are only just scraping by and as the cost of living increases (which it is and will continue to do) wages just don't increase as much. Banks, laws and governments are not there to protect us and to make sure we all live within our means I can assure you of that. So yeah I believe that there will be loads of people who will need to sell their houses and they may not get what they paid for it, they will be lucky to even break even. The property market is declining and I can't imagine it will get back to where it was any time soon and people will start to feel the pinch. So that is why we would like to sell. We'll be happy to break even at this point and where the market is at here I'd say that we can manage that. Then we can rent and when prices fall even more and then start to rise we can buy again and hopefully get an even better place with a smaller home loan over all.