Monday, December 13, 2010
Property plateau visualised
This blogger has been arguing the likelihood, all things being equal (that is, no external shock) that property is headed for plateau not collapse. The kicker being that the flattening out of prices could last a long, long time.
This belief is based upon the extraordinarily deep faith Australians have in property as a long term investment, as well as the extraordinary array of public policy supports there are for housing investment.
That is not to say that there will be no falls in prices. In fact, this blogger expects significant falls, mostly in areas dominated by first home buyers - outer suburbs. The green belt around the inner city is where the FHBG spiked prices first. Those that sold then moved inwards, firing up inner city prices.
But as the subsidy is withdrawn the outer areas are suddenly overpriced and begin to fall. Those that bought in the burbs with the grant are suddenly under water and can't sell. The move-up ladder stalls and inner city prices plateau.
This is what happened in Sydney in 2003 after the first FHBG. This blogger expects it nationally this time around.
The SMH has a great image today (above) of auction clearance rates that shows this process in action. Note the reasonable clearance rates in the inner suburbs and collapsed rates in the outer.