Perth property plunge ploughs on

Another set of figures has underscored the doldrums facing Perth property, with RP Data's monthly look at the housing market showing Perth has overtaken Brisbane as the nation's worst performing capital city.
According to the RP Data-Rismark Hedonic Home Value Index, Perth dewelling values dropped three per cent in the three months to April, taking the median house price down to $468,250.


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The main determinant of house prices is demand and this is stimulated by the level of housing interest rates, the availability of credit and family/individual income and population growth. After the 1989/1991 recession caused by RBA driven artificially super high interest rates of 18% pa for three years, the housing market collpased along with all our State banks and almost Westpac and the ANZ. It took almost a decade for the young to once again start acquiring reasonable jobs and income. There was a ten year collapse in housing demand as the young were not marrying. This is despite housing interest rates being dropped to circa 6.5% pa from July 1991. However in 1994 when there was a bit of life in the market the RBA again wrongly hiked housing interest rates by 2% to 8.5% for two years, killing the market in an instant. It was only in 1999 that young people gained enough confidence to start marrying again and having families and in doing so 10 years of demand was compressed into a few years forcing housing prices to start to rise rapidly well past the long term average of 200 times average weekly male earnings to 400 times or more. With high immigration levels of often well off immigrants and a low dollar for most of this decade money flowed into out housing market from overseas at an enormous rate. Combine this with the big four banks literally shovelling record levels of credit out the door, we got over pricing housing in relative terms. Would housing prices be this high if the maximum loan was $100,000? Not likely! However, it is no longer realistic to measure housing prices in terms of the long term average multiple of earnings because the houses today are twice as big and invariably luxurious. Moreover most families have two incomes. Moreover, people today would rather not eat than not meet their mortgage payments on time. What will suffer first will be spending money on wasteful private school education, when families can send their offspring to a now very good and improving nationally audited and funded public system. Housing rates steady at around 6% pa is about the right rate and anything higher is just an unfair burden on our industrious young families and usually means less sport, family holidays etc., and worry. Until the RBA gets rid of its old guard that were trained through the volatile high interest rate period 1974 to 1991 and still think they acted judicioulsy, young families will suffer. At least Dr Martin Parkinson the new secretary to the Treasury admits that they got policy badly wrong in the early 190's and he was one of the guilty. Don't panic about Perth housing prices.
Great to see this coming out in the MSM at last. Awareness of the housing bubble is really seeping into the brains of the masses in Australia. The biggest driver of house prices is sentiment, when consumers are confident they’ll bid up prices to crazy levels irrespective of fundamentals, but now the tides turning, panic is setting in and they’ll all run for the exits at the same time, especially the speculators holding multiple investment properties. I can smell the fear. It’s palpable on where the desperate bulls and real estate agents are frantically posting in an attempt to drown out the bearish sentiment, but it's not working too well! For the property bulls and shills, the party's over and they know it. No more endless capital gains, no more rents through the roof, no more easy credit, no more lo w interest rates, no more mass immigration. No more stimulus. Nothing left to keep in air in the bubble. The govt is out of ammo. The RBA wants the bubble to deflate. The bulls are on their own. If they sell now, they just might get out of this with their shirt on.

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