The property market is Dubai is crashing and burning as we speak. It was inevitable of course, but never underestimate the perseverance of a property boom.
On that note I want to talk about the future here in Australia. In 2010 and beyond I foresee the following sequence of events.
1. Rate hikes of another 0.5%
2. Property prices will flatten and fall in some areas
3. The government will run out of ways to keep housing demand propped up – we had more cash injections and foreign buyers (although as yet I can’t imagine what else may be dreamt up).
4. Inflation will be a major concern again – the USD will recover and the fuel price here will head up.
5. September 2010 will lead to another correction on the share market, taking the ASX200 down below 4000 again.
6. But then a strong rebound in November up to 4400
7. House price will stabilise at 10% below their peak (in nominal terms) but real growth in house prices will not occur until 2015.
8. A Current Affair and Today Tonight will has specials about house prices crashing in certain areas and people being forced out of their homes by mortgagees.
9. Even while this is happening, people will continue to shout and scream about a housing shortage and argue for reduced taxes on developers (even though we have the world's biggest houses)
10. The 2011 census data will show that demolition rates were less than expected and that the total number of dwellings in Australia is higher than expected (the remarks by the RBA’s Ric Battellino seemed a bit pushy on the supply constraint issue).
It’s not a catastrophic forecast, but it seems reasonable to me. Anything I've missed?