My Blog

I posted my analysis about australian property market a while back: http://helloworld.blogs.friendster.com/my_blog/2006/07/australian_prop.html

I wrote that analysis about a year ago, the ABS (Aussie Bureau of Statistics) just released their latest survey, theage newspaper (www.theage.com.au) made a brief news about it, one line that struck me is this:

According to the latest census, Australians are richer in terms of assets, yet accumulated more debts than before.

I haven’t seen the actual figures of Australian housing debts, but this will definitely impact property market negatively. I also read news about investors being left out in the cold after the collapse of westpoint, fincorp & ACR (http://www.domain.com.au/Public/Article.aspx?id=1182623958940&index=NationalIndex&headline=20,000%20victims:%20Who++39;s%20next&s_cid=FDMedia:FDMedia:Age:CPB:whosnext:020707)

Those facts suggest that a downturn is imminent. However:

I just had a conversation about the taxation system in Indonesia. Apparently they are getting tougher and tougher. This may lead to flight of capitals (it’s a well known facts that nobody pays tax properly in indonesia - except for… well, me  - in case any tax man read this, haha=)

If this trend is repeated throughout the region (this really depends on each country’s government financial strength, the richer a government is, the less likely it will tax its citizens more). Then we’d be seeing capitals flowing out of these countries, and Australian properties can be seen as safe haven. Consequently, this may sustain or even exarcebate the high property prices in Australia.

Considering those opposing forces are moving together, I would bet that property prices aren’t going anywhere anytime soon. However, this also depends on commodity boom, when it’s over - we may see a slight downturn.

Speaking of downturn, there are reports in sydney that people are forced to sell their homes for less than what they bought because they’ve defaulted on their loans (theage). However, such cases are isolated in poor suburbs. Nevertheles it is a downturn.

Last words: when property becomes a choice for investment, it inevitably becomes a medium for speculation. And where there is speculation, prices no longer reflect real values - merely projection values (i.e: if you feel that a property is going to worth AU$700k in 3 years time, you won’t hesitate paying AU$500k for it, even though the market value is just AU$400k).

Speculation distorts market values. Unfortunately how and which direction it will take the market is also a matter of speculation.