With the end of the government First Home Owners Boost at the end of December 2009, after a 50% reduction in October 2009, the housing market has begun to slowdown. There is much 'propaganda' stating the 'hole' left by first-time buyers is now being filled by property investors, but this is hard to imagine.
Property in Australia is no longer viable based on the level of income from rental (on average just 2%, when a good savings account will earn a minimum of 6% risk free), and investors can only now be gambling on future potential capital growth in the housing sector. If anything, the FHOB has exasperated the potential for total collapse of the Australian housing market with affordability at an all time low.
In addition to the increasing standard base rate from all-time record lows (with 3x 25pt rises so far, and more for 2010), there are increasing costs for electricity, gas, water, fuel, etc... this is directly hitting the pockets of Australians. It has been reported that of the recent boom in first time buyers, over 50% are already in mortgage stress (over 35% of income spent on repayments). As we progress through 2010, time will tell if the bubble will burst.
My personal prediction is that the housing market bubble will in fact burst, and it WILL be this year (2010). Though I do stress that the drop will not be as big as many suggest, and I anticipate a modest adjustment of between 10%-20%. Overall I expect a complete stagnation of the market for up to 12 months, before slow gains begin to be made.
