Saturday, August 2, 2014

Interest Rates and Housing Bubble in Australia?

Interest rates for residential housing are at lifetime record lows.  Banks are awash in cheap cash that they want to lend.  Lending standards have deteriorated, and money is being loaned out willy nilly.  Good established properties in Brisbane are selling quickly at good prices.  Those wanting to invest are turning to off-the-plan apartment developments, where it is an easier process to sell and buy -- but at higher than market prices.  Is housing price growth solid and sustainable, or a bubble?

When buying, questions to consider:
  • What will happen when quantitative easing ends in the USA?
  • Will there be inflation?
  • What is the risk of the Australian government removing negative gearing, and what impact will this have on property prices?
  • What will happen if China property prices collapse?  What will happen if Chinese buyers stop buying in Australia?
  • In a year, will all off-the-plan buyers be able to settle?
  • Why are off-the-plan prices for apartments much higher than similar properties that the developers have sold, and the first owner is reselling?
An interesting article re the possible bubble is here.

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